Although title loans are tagged as risky, innumerable folks still use them for fulfilling their different financial obligations. Therefore, such loans are not completely bad because their significant use despite the risk factor says a lot of their pros. This makes it vital to discuss how these loans should be used so that the risk factor can be minimized up to a great extent. For those who are not aware of, the risk of title loans crop up in the form of consequences when you fail to pay back the loan. With such a failure, you are surely going to lose your car as well as decrease your credit score further.
Therefore, it is extremely vital to know how to ensure responsible usage of these loans. There are many online providers such as Midwest title loans who are offering instant cash for car. But before you approach them, it is essential for you to know how these loans work and why risks crop up so that you can make a safe deal.
How Title Loans Function?
A title loan is a secured lending featuring the amount as per your car value. In most cases, you will be able to take up to 50% of your car’s worth. But for this to happen, you need to obviously have a car whose price is totally paid off. The chosen lender then tends to assess your car’s value before presenting you an offer. Here, you need to remember that there is no need to borrow all that is on offer. It is wise to borrow less because doing so can save significant money and can also make repayment burden-free. Although these loans are repaid within a month right from the day you take the money, the duration of repayment can change from one lender to another.
Why Risks Crop Up to Take a Toll?
Just imagine a scenario when a person needs only $1,000 but is provided an offer of $3,000! What you think will happen in this case? Well, the person is sure to take that $2,000 extra instead of taking what is required. This is the main reason why several people tend to face problems with car title loans. If you compare title loans to payday loans, the former is much larger in terms of amount than your income. But because you accept the big loan, you allow the lenders to take the advantage of lending you more and then enjoying the extra interest and penalty fees on default. Not only that, but in worst cases, the lenders can even take away your car. Therefore, to keep risks at bay, it is better not to borrow a single penny above your needed amount.
What Proactive Steps Can be Taken for a Wise Deal?
Prior to applying for a title loan, ensure that you find out the precise dollar amount in need so that you can borrow only that much. If you fail to do so, then you will be only responsible for the aftermath as you struggle to repay it. So, find out the exact amount you need by taking into account your possible sources of income and expenses. Further, ensure that the lender is not giving you any other options. A title loan with many options can be troublesome. Do some online research to get an affordable interest rate that is actually always high.
In case you accept a big loan, be ready to repay it by seeking new ways of earning money. You may have to work overtime, sell your old stuff online, cut down your current expenses, and pick up some weekend jobs. Taking these steps will relieve you from the tension of repaying the loan.
Ramy Gobel is a financial geek who is a freelance writer by profession. He is recently an in-depth research on car title loans by focusing more on online lenders and the possible pros and cons. Ramy recommends Midwest title loans for Americans.