Financial institutions offer car title loans to consumers who need to get cash quickly and have no other sources. The loan process and the requirements are similar to those for vehicle financing. When applying for a title loan, a consumer must present a clear title for the vehicle he is using as collateral.
Car Loan vs. Title Loan
Car loans and title loans are similar but serve different purposes. A car loan finances a vehicle. A consumer uses proceeds from a title loan for his personal needs. A vehicle serves as collateral for these loans. Insurance requirements are the same for both types of loans: a car owner must carry a liability coverage until the loan has been repaid. It protects the consumer and the lender if a vehicle is totaled in an accident. In this case, the insurance company would pay off the loan.
Title Loan Qualification Process
The qualifying process for title loans is similar to the one for auto loans. A consumer may go to a bank branch and fill out a loan application. He must bring paycheck stubs or tax forms to show his current income. The consumer must present a free and clear title. If the title lists a lien holder, the owner must show a lien release. During the process, the lender will pull the applicant's credit report. If the consumer doesn't qualify, the lender may suggest getting a co-signer.
Title Loan Collateral Qualification
Not all vehicles can serve as collateral for title loans. Creditors may be reluctant to lend money on older vehicles with high mileage because they hold little value and are difficult to resell if a consumer defaults on his loan. The maximum collateral age varies by lender. Lenders may make exceptions for collectible and rare vehicles. Used car guides, such as NADA and Kelley Blue Book, provide a fair market value of vehicles. Creditors may lend up to 100 percent of this amount depending on each individual situation.
Title Loan Proceeds
Before receiving the funds, the consumer must bring or mail the original title to the lender, who will then issue a cashier's check for the loan proceeds. The lender will apply for a lien by sending the title and the loan documentation to the local department of motor vehicles (DMV). The DMV will re-issue the title with the financial institution listed as a lien holder. In some states the title is then mailed to the car owner and a lien card mailed to the financial institution that holds the loan. In other states both the lien card and the title are mailed to the creditor. Once the loan is paid off, the lender will mail the lien card and the title (if applicable) to the owner.
0 comments:
Post a Comment