What is a title loan?
Need cash fast? A title loan is a short-term loan that uses your vehicle as collateral. They’re often marketed as a quick way to get cash, especially if you’re in a pinch.
If you’re thinking about getting one, you’ll want to know what the requirements for a title loan are. This article will break down the eligibility criteria and help you understand the process so you can make an informed decision.
This information is for people who need cash quickly, maybe because they have a limited credit history or don’t have a traditional 9-to-5 job.
Basic Eligibility Requirements for a Title Loan
Title loans are usually easy to qualify for, but there are a few basic requirements you’ll need to meet. Let’s take a look at the main eligibility factors.
Age and Ownership
You’ll need to be at least 18 years old to apply for a title loan. You also need to own the vehicle outright, meaning you’ve paid it off and the title is in your name. The title also needs to be free of any liens. If the title isn’t in your name, you may still be able to get a title loan, but you’ll need to discuss your specific situation with the lender.
Identification and Documentation
You’ll need to show a valid government-issued photo ID, like a driver’s license. You’ll also need to provide the lender with the actual vehicle title. The Vehicle Identification Number (VIN) will be required too, so the lender can properly identify the vehicle.
Proving Ability to Repay: Income and Other Factors
When you’re applying for a title loan, you’ll need to convince the lender that you can repay the loan according to the agreed-upon terms. Here’s how that usually works:
Demonstrating Income
Lenders need to know you have money coming in each month. You may not necessarily have to be employed to qualify, though. Many lenders also accept income from disability, Social Security, or retirement payments. LoanMart, for example, says they accept all kinds of income, not just a traditional paycheck.
Vehicle Evaluation
The amount you can borrow depends on the lender’s inspection and appraisal of your vehicle. Your car’s equity is a factor in the loan amount, and you can often borrow up to half of what the car is worth.
Credit History
Your credit history is usually less important than the car itself. Because the loan is secured by your vehicle, lenders are more interested in the vehicle’s value than your credit score.
The Application Process and Required Documents
Applying for a title loan is usually a pretty straightforward process. It involves gathering some information and submitting a few documents.
Gathering Necessary Information
Before you start the application, make sure you have the following information handy:
- Personal Information: You’ll need to provide your name, phone number, email address, and zip code. This helps the lender verify your identity and contact you.
- Vehicle Information: Be ready with the specifics of your vehicle, including the make, model, year, and current mileage. This information is essential for assessing the vehicle’s value.
Submitting Documents
Once you’ve gathered all the necessary information, you’ll need to submit it to the lender.
- Methods of Submission: Many lenders offer multiple ways to submit your documents. You can often do it online, via email, or even by text message, depending on the lender’s capabilities.
- Online Application: Lots of lenders now have online application processes that allow you to apply and even pre-qualify for a title loan from the comfort of your own home.
Things to consider before getting a title loan
Title loans can be a quick way to get cash, but they come with some serious risks:
- Vehicle Repossession: If you can’t repay the loan, the lender can take your car.
- High Costs: Title loans typically have very high interest rates, which can make them difficult to pay off.
- Loan Amount Limits: The amount you can borrow depends on how much your car is worth and your income. You might not be able to borrow as much as you need.
Closing Thoughts
Before you apply for a title loan, it’s essential to understand the requirements and make sure you can afford to pay the money back. Title loans can provide quick access to cash, but it’s important to weigh the risks and costs before you borrow.