Is a Title Loan the Right Tool for Your Needs?

Title LoanOne of the most popular “quick” loan types, car title loans are second only to payday loans in ubiquity. Their convenience and the relatively lax requirements for borrowing make them perfect for short-term borrowing needs.

It’s easy to get a car title loan, even with poor credit. After you’ve been approved, industry professional explains that you retain full use of your car. The lender will return your vehicle’s title the moment you settle the balance, making it an exceptionally hassle-free process.

But, like any other tool, there are right and wrong situations to use it in. A title loan’s annual interest rate is usually higher than even a credit card, since it is meant for emergencies. In other words, you need to be sure that you can responsibly pay it off.

Who Benefits the Most from a Car Title Loan?

The best case scenario is if you are someone with a high income, but just currently need some quick cash. Whether it’s because you have poor credit or all your cards are maxed out, you are looking for a fast and easy loan. You’re confident that you can pay off the balance in full when the time comes, and will thus be able to keep the interest cost to a minimum.

If you have been struggling to make ends meet for months, however, then a title loan probably isn’t the best choice. You may finally get some breathing room, but if your income is already stretched, then the loan’s interest will just add to your burden next month. There’s a good chance that you’ll fall behind in payments, and the debt will mount until your car is repossessed.

Not everyone should get one of these loans; it could be a better idea to just sell your car yourself. Even if you fit the ideal customer profile, don’t be careless. Always shop around, choose a trustworthy lender, and read the fine print before borrowing.