Don’t have a high credit score and are in dire need of cash? Do not worry. You can solve your short-term liquidity problems by engaging in a loan format known as a title loan. Ultimately, a title loan does not take into account a candidate’s creditworthiness during the appraisal process. Due to less stringent criteria, this class of loan is rapidly approved and ranges in amounts. It can even be as low as £100.
Car Title Loan
Loan aspirants tend to apply for title loans to procure vehicles. This kind of title loan is known as a car title loan. What happens is that candidates use the car and hand over the ownership title to the loan service provider.
The latter will loan twenty-five percent of the automobile’s aggregated value to the candidate and maintain the car’s title deed as collateral. Normally, title loans for vehicles average £1000 and can go higher. Lenders outline repayment plans depending on the circumstances of the candidate in question.
Some may allow a one-time payment after a month only whilst others may opt for a more flexible scheme that spans a period of two years and consists of monthly payments. If a payment is missed or defaulted, then the lender has the right to take control of the asset instantaneously.
Retrieval of Asset
If you declare an asset as collateral against a loan, you make it open to a fair takeover by the lender in case you are unable to meet a payment. They will have the legal right to own your property.
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Compare variant portfolios of fiscal services offered by lending institutions such as Top Loans Companies and see if you can cash in on a promotion or a new deal. New players in the financial market usually give a discounted incentive to attract new consumers and to increase their customer base. You never know, you may just hit the jackpot!
The Real Price of a Title Loan
Title loans may sound like manna from heaven to those who are financially strapped and need money fast. Regardless of the urgency, you must stop and consider whether it is truly worth your time and energy to take on a title loan. Its very nature involves a high annual percentage yield (APR) that can go up to three hundred percent and is usually more than a hundred percent of interest rate.
To understand this clearly, consider a £500 car title loan with a complete repayment in thirty days. Even with such a short time, the annual percentage yield can go up to three hundred percent. Essentially, the loan applicant will end up paying £625 as the principal sum along with interest.
Another instance that required a higher amount: say £1000. The terms allow for a two-year instalment plan can have an annual percentage rate of one hundred percent. Under this situation, a 108% APR will end up being a total payment of £7394 as interest charges besides the main sum of £5000. This means it would be a total of over twelve thousand pounds that the candidate pays over a period of only two years.
Misrepresentation of Title Loans
Did you know that title loans are illegal in twenty-five states in the United States of America? The states of Virginia and Missouri witnessed cases where title loans had been taken out by customers. Or so they thought they had. With variant terminology to disguise the true nature of the loans, names such as “consumer finance loan” or “consumer instalment loan” have been utilized. The fact is that such finances are less structured and regulated than their predecessor of title loans. Fiscal establishments offering this kind of service have strategically designed reimbursements to go on much longer than normal loans and have virtually an unlimited volume of interest attached to it. Wannabe loan sharks deliberately take part in this practice to filter out state level rules and regulations. The best way to protect yourself is to stay away from it in the first place.
Loss of Collateral
As previously stated, a lender has the right to take possession of the provided collateral in case of a defaulted payment by the borrower. According to a study conducted by the Consumer Financial Protection Bureau, every one out of five borrowers lose their property. We hope you understand what this number is as it constitutes a staggering twenty percent of asset loss.
Elevated Interest Rates
Title loans are infamous for incorporating ridiculously high interest rates. And usually these are much greater than other loan formats, such as a credit card. People try to stay away from the clutches of credit card debt; yet the super high interest sums charged under title loans make the former an attractive financing option. With a three hundred annual percentage yield over a short period of time, people don’t stop to think and make calculations themselves to truly comprehend the economic trap they are getting themselves into.
Everyone wants to make a little extra moolah here and there. However, title loan service providers take this concept to a whole new level. They have come up with pricing strategies that are applicable to a diverse range of circumstances. For instance, if you submit your payment a bit, you will get slapped with an extremely high late fee charge. Want to increase the life of your loan? Yes, you guessed it-there is a fee for that too and is known as a loan extension charge. Apart from that, things like processing fees, application fees etc can be claimed as well.
End of Term Balloon Payments
There is another alternative to short period title loans: long term ones. What happens here is that you recompense the interest sum only every month. This loan category is known as a balloon loan as you repay the principal sum at the end despite the regular interest payments you have been undertaking.