What is title pledge? | Car loan express
Title pledging, or title loan as they are also known, is a practice borrowers sometimes use to get some quick buck. These are similar to a personal loan, but you use your car as collateral. While these loans are designed to help in a pinch, they are best avoided for several reasons.
Title Loan Explained
A title loan is a loan where you hand over the title of your vehicle as collateral for a short term loan. These loans usually last around 30 days, but some lenders may allow more time. Plus, they come with high interest rates.
They are often attractive to people who own a car but need cash quickly. You can usually get one in about an hour or less depending on the situation, and you can still drive your car. The lender only holds the title.
But here’s the catch: if you take out a home loan for your car and don’t pay it back, you will lose your car. For this reason, title pledging is a great risk.
To obtain a property loan, you must have equity in your vehicle and usually own it free and uniquely. Lenders typically only loan out 25 to 50% of the vehicle’s value in order to recover their investment and make a profit by selling vehicles whose loans have not been paid. Some can even install GPS monitors and make copies of your keys to help ease the return process if you don’t pay.
Can I pawn my title?
Whether or not you can mortgage your car title depends on a few factors. As with most loans, eligibility requirements vary depending on the lender and your personal situation. Usually these guidelines can be followed if you are thinking of mortgaging your vehicle title for easy cash.
Ask yourself these questions:
- Do you own your car? – If the answer is yes, you may be eligible for a title loan. However, if you still owe money on a car loan, you probably don’t qualify.
- Is there equity in your vehicle? – When you own your car, all of its value is equity. If you don’t, you will have equity if your vehicle is worth more than you owe the loan.
- Can I realistically afford to pay it back? – Remember, if you take out a large part of the change that you have to repay it quickly or you risk losing your vehicle.
- How much more do I have to pay back than I borrowed? – As with personal loans, the interest rates on title loans can be very high – often up to 200% or more. It is possible that you will pay hundreds or even thousands more than you borrowed, depending on the size of your loan.
- What better way to get more money? – If you are in need but the need is not great, you may find other less expensive and risky ways to get the money.
If you answered NO to any of the first three questions, pledging the title is probably not for you.
Do you need more money without a title pledge?
If you have a loan for your car and are in need of quick cash, a cash out refinance could be the thing for you. This enables you to take the equity out of your vehicle and use it in other ways. To qualify, you must have equity in your vehicle and meet all of the lender’s refinancing requirements.
Here’s how it works: Imagine you only owe $ 4,000 on your loan, but your car is worth $ 6,000. If you qualify for a payout refinance, you will receive a new loan for your vehicle of $ 6,000 and receive $ 2,000 in cash. You can use the money however you want and repay the loan until the end of your new term.
Another option to consider
If you don’t own your car and need a break from your expenses, consider refinancing instead. The refinancing replaces the current loan for your vehicle with another one, hopefully with a lower interest rate.
Most borrowers refinance to save money on their auto payments every month. You can do this by qualifying for a lower interest rate or a longer repayment term. Both of these will save you money every month, but only if you qualify for a lower plan will you save every month. If you only extend the term but don’t lower the interest rate, you will pay even more in the long run.
If you think refinance might be the answer you’ve been looking for, options are yours. Car loan express wants to help you get the refinancing business you want by connecting you to the right resources. Start your refinancing journey today!