Moreover, if the loan company reports up-to-date payments to the credit bureaus, the title loan may also be utilized to increase the borrower’s credit score. These advantages and more make this kind of loan an attractive proposition for many people but it should be pointed out that there are a number of pitfalls to avoid.

One of the primary complaints against auto title loan firms is the higher interest rates that they use when compared to the rates applied by conventional loan providers, such as banks. This could vary by a wide range and it is up to the would-be borrower to conduct an extensive research to find those companies that offer the lowest interest rates. If the borrower does not conduct this kind of research, he may get caught in a debt trap where he keeps on applying for a new loan just to be able to repay the previous one.

Another potential pitfall that could entrap a person when he gets a car title loan is the escalating interest rate. This is often the case if the borrower is unable to come up with the payment when it becomes due. This is called the rollover but the problem is that this will cause the interest rate to increase. The problem is that this will cause the payable amount to become bigger whenever a rollover is permitted, thereby trapping the borrower in a hole that gets deeper and deeper. To prevent the above problems from happening, some states limit the number of allowable rollovers while others have implemented a rule that a rollover will only be allowed if a certain minimum percentage of the principal has already been paid.

Finally, the worst pitfall that a borrower could get into is the failure to repay the loan. This is highly undesirable because the penalty is the loss of the car. What is even worse is that the lender will always lend an amount that is much smaller than the resale value of the vehicle. Nevertheless, the title loan company gets to keep all of the proceeds in the sale of the car although this is more than the amount that is owed.

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The procedure for submitting an application for this type of loan is also much easier when compared with conventional loan, such as bank loans. However, some loan firms engage in predatory lending practices while others even make use of aggressive promotional practices to attract more people to loans that have unusually high interest rates that are considered to have reached usurious levels.

To avoid falling prey to such predatory methods, it is important for a person to search for an honest car title loan firm. One of the major clues that you are transacting with an abusive lending company is the relatively large interest rate that is applies. To be able to determine whether the rate is uncommonly large, it is important for you to conduct a research. This can be easily done by using a search engine to find a number of car title loan companies and comparing their interest rates. It is advisable to be careful here because most companies will advertise their interest rates using monthly rates instead of annual rates.

Another giveaway that you are dealing with an unreliable title loan company is when there are balloon payments. The technique that is applied by this type of loan firm is to offer relatively low interest rates at the start. However, the beginning interest rates are only low because there are a number of balloon payments that will follow.

Failure to completely read the loan agreement could result in the failure of the borrower to repay the loan. In turn, this may cause the borrower to ask for a rollover. In time, the payable amount will have become too large for the borrower to repay and he may ask for a rollover or an extension.

Another tactic used by disreputable title loan companies is the failure to inform the borrower that the interest rates and fees are negotiable. By entrapping the borrower to agree to the abusive rates, the lender could use very high interest rates that even go up with each rollover. The effect is that the debtor will be trapped in a cycle of debt that may go on for a long period of time.

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It is common for the available amount from a title loan to be 50 percent of the estimated resale price of the car. Some loan companies may even offer a maximum loan amount that is larger than 50 percent of the vehicle’s market value. It should be pointed out that it is vital for a person to completely own the car to qualify for a title loan. What this means is that the vehicle title should indicate the borrower as the sole owner and that there are no liens attached to it. It is also a common requirement that the car’s external appearance should not decrease its selling price and that its engine is in good running condition.

The vehicle title loan company will also want to obtain some identification and proof that the borrower resides in a particular address. Another important requirement is that the borrower should be able to offer proof of dependable income source. Normally, a pay slip or income tax return may be utilized as proofs of income.

After the car title loan company has verified the identity, residency and the presence of a regular income source, it may then release the loan amount in as short a time as 15 minutes. It is advisable for the borrower to check the interest rate that will be applied for the loan because this can have a significant impact on his or her capability to repay the loan. It is therefore prudent to look for the finance company that offers the lowest interest rates in your area.

Do not forget to shop around for companies that have the lowest interest rates and fees. Meanwhile, in the event that the borrower is unable to comply with the payment deadline, some companies may also allow him or her to roll over the loan for another month. However, it is also important to check the interest rate because they usually increase it when you roll over a loan.

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Before we continue, these types of loans are also known by other names. They are also called pink slip loans, title loans, auto title loans and car collateral loans. They are called title loans because the borrower should have clear title (meaning there are no loans against it). Now let’s examine how to get a loan.

These loans are excellent for people with a history of bad credit. The reason for this is that a lender doesn’t pull your credit report or credit score. The lender just needs to see there is value in the car and you have the income to pay off the loan. Even if you have a recently closed bankruptcy, you may qualify for a loan.

Despite the name, car title loans are not just for cars. If you have equity in a boat, motorcycle, pickup truck or SUV, you are eligible for a title loan. A car title loan lender can accept all of those vehicles for a loan.

If your in need of a quick short-term loan, then car title loans may be the way to go. A loan can range from a quick 2 week loan to a loan term of up to 2 years. When shopping for a loan, ask the lender about the length of their loan policy.

There are several variations of car title loans. As stated before, they can range from 14 to 30 days in which you just pay interest. This is called an interest only loan. You just pay interest on it and when the loan is due, you also pay off the principal balance.

Something to check when you get the loan is to see if there are any prepayment penalties. Most states do not allow lenders to charge you a penalty if you pay the loan off early. This is good to know. If you can pay it back early, you will save money on those interest charges.

The lender will then check the value of your car. Based on your monthly income and the cars equity, the lender will figure out the most they can loan you. Most lenders will loan you 50% of the cars value. Check around though. Some lenders will go as high as 66% of the cars value.

Paperwork for a car title loan is minimal. You will have to start out by showing a monthly income. This can be done by showing your 2 latest pay stubs. You will also need to show the car title loan lender a valid drivers license and a paid for car insurance policy. Next you have to show proof of where you live. This can be done by simply showing the lender an electric or cable tv bill with your name and address on it. If you are unemployed or out on disability, you may still get a loan. If you can prove to the lender you have a regular monthly income, you can possibly get the loan. What counts as a regular monthly income? A government check would. If your are receiving a disability or a social security check on a regular basis, this can probably be good enough to get the loan.

There you have a good background on what a car title loan is and how to get one. Your next step now is to go find one.

Getting a pink slip loan is very easy. If you need cash in a hurry, you need to read about loan against car title

To find one of these lenders, you’ll most likely need to find one in your local area since they like to look at the vehicle that the loan is being made against but there are some companies making these loans online now (there’s at least one I’ve seen in Arizona). The local places will want to be sure that they’ll be able to sell the car, so they’ll need to see what condition it is in. Often, the amount that you’re allowed to borrow will depend on what condition the car is in when they do the appraisal. You may also find that their appraisal is lower than what the car’s actual value is worth. This is because they will not want to spend a lot of time trying to sell your automobile for the right price if you fail to pay back your loan. They’ll want to get rid of it as soon as possible and to do that, they’ll need to sell it at a low price.

Some other car title loan qualifications may include:

• You have a land line phone were you live.
• You need to reside at your residence for 12 months or more.
• You have a lease or mortgage statement in your name.
• You have worked at your job for at least 12 months.
• You are at least 21 years old.
• You make at least $1,000 per month.

Once you’ve been approved, the car has been appraised and your loan interest rate is computed, you’ll be able to make a loan up to the value allowed. You’ll notice that the interest is going to be very high. It may be written as something like 25% but since the loan is just for one month, the real interest rate over a year is something like 300% or more. You may also find that the loan amount is for $601 or more. This is because they’re allowed to charge higher interest rates on loans over $600.

During the term of the contract, you may need to keep paying auto license fees and minimum liability insurance may also be required or even comprehensive insurance as well. Also, the company making the loan will put a lien on your vehicle. There may be some title fees associated with adding the lien or removing it.

When the loan comes due, you may be able to extend the loan. Doing this often requires a payment but in some cases, it may not. That interest due for the last month will be rolled into the next month, so it is to your advantage to make some sort of payment anytime you can. Even paying a day early can save you some money. Check your local laws, but often loans cannot be rolled over (or “flipped”) more than 6 times. By that time the interest would be sky high anyway.

If you do not pay back your loan, the car title loan company can repossess your car. They will sell it to pay back the loan. They will often do this instead of try to sue you for the money. If this is about to happen, you can try to contact a lawyer and see what options you have.

People that choose car title loans often have credit problems or they would get a better loan somewhere else. If you do sign the loan and want to get out of it right away, you do have one business day in which to do that. You will have to give back the money that was borrowed. You would not owe any interest at that point. So you could take out a loan Monday morning and pay it back by the end of the day Tuesday with no interest due.

These types of loans are risky. You may be risking your family’s primary mode of transportation, which could make things really, really difficult if you lose your car. So make sure you take your time to understand all the terms and conditions of these types of loans before signing.