A lot of the time, when we think about vehicles and loans it’s because we are dreaming about borrowing the money to fund the purchase of a new car. Who doesn’t feel excited about the idea of getting behind the wheel of a new vehicle for the first time? Of course, there’s an increasingly wide and varied range of financial products available to help us get into a new or used car these days.
However, that’s not what we are looking at here. Drive away loans , or auto title loans as they’re also known, are completely different from the financial loans that you get to buy a car. Instead of borrowing the money that you need to buy a vehicle, an auto title loan allows you to raise money.
So, you are getting cash from your vehicle , rather than for a vehicle. This is something that may be right for many people who need to get hold of some cash right away.
What is a car title loan?
A car title loan is where the owner of the vehicle uses equity in their vehicle as collateral . The amount of money that can theoretically be borrowed against a car varies from one money lender to another. However, the maximum will always be based on the value of the vehicle and the amount of equity that there is in it.
If a car has a wholesale value of $15,000 the maximum that could be borrowed would be half of that, which is $7,500. To take out the cash loan, the borrower must also have clear title on the car. A cash loan won’t be considered if there’s outstanding finance on it already.
The loans range from $2,000 to a maximum of $15,000. However, there are some money lenders who work to differing criteria and for shorter and longer periods. Compared to more traditional forms of lending, these short-term, reasonably low-amount loans have relatively high interest rates. This is because they’re designed to be paid back sooner than a loan from a bank or somewhere similar would normally be.
Why is a car title loan so popular?
This form of money lending is mostly designed to help people out in the short-term when they need to pay for something urgent or need tiding over until the next pay check arrives.
The CoreData/Financial Mindfulness Financial Stress Survey in 2017 showed that close to 1 in 3 Australians are under stress due to money worries . In many cases, they simply don’t know where to turn to in order to get hold of some money urgently. This can lead to health problems and can even harm relationships over time.
You might think that using a credit card offers a way out. Yet, the Australian Securities and Investments Commission (ASIC) revealed that over 18% of Australians are already struggling with their credit card debt . This translates to over half a million borrowers who are behind with their loan repayments.
Anyone who owns a vehicle can quickly sort out the loan funds that they need by using it as security. For many people, this is a lot quicker and easier than trying to sort out any other type of loan. In this way, the money concerns are immediately resolved so online payday loans for Tennessee that life can go back to normal.
Benefits of car title loans?
One of the biggest advantages of a car title loan is there’s no need to have a good credit rating, and that’s because the loan is secured against the vehicle. This means if someone has bad credit but they have a vehicle that has equity in it, they can gain access to finance they might not be able to get otherwise.