What You Should Know About a Car Title Loan

Basically, a cat title loan is a kind of debt that is provided where a borrower offers the title of his or her car as security. Many people are considering this kind of loan because it is easier to get compared to a bank loan and other conventional loans. The length of time needed to get hold of the loan amount is much shorter because it may take less than one hour. Also, there is no need for a credit check because the basis of the title loan is the resale value of the vehicle.

However, it should be noted that you would not be able to obtain a car title loan amount that is equivalent to the selling price of your car. A common practice of the loan companies is to establish a ceiling that is oftentimes only 50 percent of the selling price, although some companies are willing to provide a higher percentage. However, it should be noted that some states have forged certain regulations regarding the car title loan. For example, in Illinois, there is a maximum loan amount and this is $4,000.

The loan processing fee for a vehicle title loan cannot be more than $75 if the loan amount does not exceed $5,000. However, there is ceiling for the fee for a loan amount that is beyond $5,000. In Illinois, the monthly payment cannot be more than 50 percent of the monthly gross income of the borrower. Balloon payments are also not permitted so that installments should have the same value. Moreover, it is possible to roll over the loan only if at least 20 percent of the principal has already been paid.

Consumers usually want to apply for a car title loan to handle unexpected bills, such as medical expenses. For those who have poor credit scores, this kind of loan may also help in their goal of gradually improving their credit rating until they are finally able to obtain approval for conventional loans. Standard loans, such as bank loans, have lower interest rates but banks usually specify a minimum credit score.

The requirements when applying for a car title loan is relatively simple. The borrower must show proof of identity, such as a driver’s license or a Social Security number. Proof of income, such as tax returns, pay slips or bank statements, may also be needed. The vehicle title should also be provided and it must be demonstrated that the borrower is the owner of the car and there are no liens. Finally, the finance company may want to have the vehicle inspected physically to ascertain its market value. Click Here for more information.