Borrowing money with a poor credit history is difficult, not to mention far more expensive than it used to be. When an unsecured payday cash advance isn’t sufficient, an automobile title loan could provide the answer. Loans for people with poor credit will be offered to customers on the basis of car equity, provided that at least 75% of car finance has been paid-off. The rate of interest means that finance is normally only available for 30 to 45 days, although there is the possibility of the agreement being renewed.
How Do Automobile Title Loans Work?
The customer brings in their car and it will be professionally valued. Whilst some lenders use the blue book value, others use in-house experts. The value of the vehicle determines the size of an easy cash advance. Whilst it is possible to get a bad credit auto title loan for up to 50% of the vehicles value, this does vary between bad credit lenders. There is normally a 50% borrowing cap so there is sufficient car equity to cover any interest that accrues over the duration of an emergency cash loan.
Qualifying for Bad Credit Auto Title Loans
Although there is no credit scoring for an automobile title loan, the applicant will need to meet a specific set of lending criteria when they need quick cash. Whilst the intention is to decrease the likelihood of the customer defaulting on the loan, they are also seeking to cover their losses in the worst case scenario. The most common requirements for emergency cash loan are listed below:
- The applicant should be at least 18-years old.
- A copy of the original car title should be provided.
- The customer will normally need to have a job, but a means of repaying the debt will also suffice. For example, a large bonus or an inheritance payment is due.
- Three-quarters of all car finance must have been paid-off.
- Two forms of identification must be seen.
- A duplicate pair of car keys are needed in case of default.
The cost of an emergency cash loan is high because bad credit lenders deal with customers who have already been rejected by the banks. The higher incidence of default, coupled with the relatively short term, means that it costs up to $25 to borrow just $100 for 30-days. Interest accumulates quickly and repaying the debt could prove difficult, especially if personal finances are already severely stretched.
Dangers of Car Title Loans for Bad Credit
Failure to repay loans for people with poor credit often lead to the repossession and sale of the car that is put up as collateral. Up to 50% of all U.S. states have banned automobile title loans and others have placed restrictions on the way they operate. For example, a maximum APR is specified. Whilst it may be possible to renew the agreement, interest continues to accrue until the balance is cleared. There are instances where someone has come out of work to find that their auto has been taken. Sadly, those who need quick cash regularly find it difficult to repay it further down-the-line.