Title loans provide a quick way to raise money for a financial emergency or when you need extra funds. They’re secured loans that require an asset as collateral. The lender can place a lien on your asset’s title, which can only be removed once you’ve repaid the loan entirely. While title loans are safe for borrowers, the availability of contradicting or misleading information regarding this type of borrowing can hold users back. Understanding title loan truths and lies before applying is key to making informed financial decisions. Discussed below are five misconceptions about title loans.
Title loan requirements are hard to meet
There’s a common belief that title loan requirements aren’t easy to fulfill. Nevertheless, this perception is misleading because these loans require your asset title as collateral at the most basic level. This means the main requirement for getting a title loan is owning an asset with a clear title, implying that you should possess the asset outright with no outstanding loans or liens against it. The asset requirement is easy to verify through the asset’s title.
However, you must first determine the type of assets your preferred lender accepts as collateral by asking the right questions. For instance, if you have a mobile home, ask a question like ‘Can I get a loan on my mobile home title?’ Besides clear asset titles, other easy-to-meet requirements vary based on jurisdiction and the specific lender, including:
- Proof of income
- Proof of identity
- Proof of residence
- Asset inspection
Most of these requirements are already in your possession or can be obtained easily.
You need good credit to apply for a title loan
While most traditional loans require borrowers to have good credit to be eligible, title loans are different. There’s a common belief that you cannot be eligible for a title loan unless your credit is credit, which is untrue. Applying for a title loan doesn’t require a perfect credit score. All lenders do is inspect your asset to see its condition and determine its value to calculate how much you qualify for.
Title loan providers also know they can repossess your asset if you don’t repay the loan as agreed and sell it to recoup their money. This makes title loans perfect for those with bad credit or no credit at all.
Title loans will affect your credit
Title loans often don’t affect your credit in any way. Lenders don’t run hard credit checks or conduct hard inquiries in your credit report. In addition, timely payments won’t improve your credit score, nor will delayed payments affect your credit negatively because lenders don’t report to credit bureaus. Should you default on your title loan, lenders don’t pass your debt on to a collection agency, as they can repossess your asset and sell it to recover their losses.
Title loans can’t give you enough money
Most people feel that high-cost financial needs can only be met by a traditional bank loan because title loans can’t fetch enough cash. However, this is far from the truth because the money you get from a title loan depends on your asset’s worth. The higher the asset’s value, the more you’ll be able to borrow. Also, if your asset’s value isn’t as high, you can use more than one asset to access more title loans to ensure you get the amount you require.
You must hand over your asset to a lender to get a title loan
The misconception that a lender must possess your asset to issue a title loan, such as a car title loan, has been around for a while. The truth is you keep the asset and continue using it as you repay the loan. All you leave with the lender is the asset’s title. The lender only repossesses your asset if you default or cannot repay the loan.
The false or conflicting information about title loans can confuse borrowers and even force them to stay away. However, familiarizing yourself with the common misconceptions about these loans can help you make wise choices.