Title loans are a short-term loan that you can get by using your car as collateral. The lender will hold the title to your car until your loan is paid back. For this reason, these loans are often called pink slip loans. They can be a great deal for those with few assets and less than stellar credit, but here are few things to pay attention to when looking for a good title loan company to do business with.
Avoid car equity loans
Equity simply refers to the amount of worth a car has above the amount you owe on the car. The problem with this type of loan is that it is not a true title loan. A lender may call it any number of names, but you are not handing over your title as collateral because you don't have the title. Your car loan is not paid off. Lenders who offer this type of loan are simply providing an unsecured short-term loan in the manner of a payday loan, so you will not get the lower interest rates that a title loan lender will provide using your car as collateral.
Pay attention to add-on fees
Some title loan lenders will have certain fees that are separate from the interest charges, but they will make the loan more expensive. One example is a roadside service fee. This is a type of insurance you are purchasing that will provide emergency care service in the event your car breaks down. However, if a lender wants you to purchase this, it may be cheaper to buy it from your insurance company. You may even already have a version of this service on your policy right now. Whatever fees are included in the loan, make sure that you understand what they are.
Unlike other short-term loans that are due on your next paycheck, a title loan can be stretched out for a longer time. They often can take the form of an installment loan, so you can pay the loan back over several months. A good title loan company will have this type of payment option as part of their product offering. This can be a great advantage, especially if you have borrowed the money for an emergency. You will have more time to get back on your feet.
Title loans can be a great deal for someone in need of fast cash, but not all title lenders are the same. Take your time and keep the things listed above in mind as you shop for a quality title lender. For more information, talk to a title loan company like Flexible Finance.