![car-title-loan](/build/articles_onlinesearches_today/images/articles/finance/car-title-loan-2-540x360.jpg)
Say for instance your father needed a surgical procedure and it was an emergency situation. If you didn’t have the money right away, you could borrow some money and put up your car as collateral for it. You would effectively hand over the title to the lender until the loan had been completely repaid.
To borrow using your car as collateral, you need to at least have some equity connected to it. Most of the time, you’ll have needed to pay off any other loans that are connected to the vehicle. The amount of money you are able to borrow is dependent on the quality and equity of your car, if your car is fairly old and rusty, you won’t be getting much. However, if you have a sports car, you’ll probably get quite a bit.
How is the loan paid?
This is where the trouble with auto title loans usually occurs. The loans are often extremely short-term and have to be paid back within 15 – 30 days. The interest attached to them is often very high as well. This forces people to pay back more than they borrowed quite quickly after their original money trouble. In this way, they are quite similar to payday loans, forcing needy people into a submission where they owe more money than they did originally.
What if I have trouble paying back?
This is where auto title loans and payday loans differ. If you have a payday loan, and you have to take out another one to cover that until you are very deep in debt, they will usually take you to court or you will work out a crippling payment system with the loan companies.
With a car title loan, the Band-Aid is ripped off a little bit more quickly. Instead of going back and forth with loans after loans after loans, they take what is theirs. You put up your car as collateral, so the loan company is well within their rights to take it off you.
This is incredibly unfortunate, as afterwards you are left without a car, which will probably damage your financial troubles even more than they originally were.
So, if it is this bad, what can you do instead?
Alternatives
An alternative that isn’t that much better is, of course, a payday loan. This is another option that is heavily suggested against as you get stuck borrowing more and more from the loan company until you’re are in big trouble.
Friends and family can really help in trying times like this. If you sit down with a close friend or family member and explain your money situation with them, you’ll be able to work out some sort of fair loan situation. You must remember that you can’t take your friends or family for all they’ve got. You have to be humble and take whatever they can spare, and promise to pay them back when you can. This means you put the money they lend to you into something beneficial, that will turn into some form of extra income.
Sell your car for a cheaper one! If you are having money troubles but you are zooming around in a car, not unlike a Ferrari, you could easily sell that car. It would give you a lot of extra cash, with which you can buy a more conservative car and use the leftover cash to your advantage. It might be a long, arduous ordeal, and you may love your current car very dearly. However, if you are having money troubles, you have to be willing to sacrifice what you love in order to be better off.
Plan and prepare if you really have to take out a car title loan. If it’s the only viable option for you, you must be sure that you can pay back that loan. You can’t act surprised when they start asking to be reimbursed, as you entered into a contract that very clearly stated when you needed to pay the money back. Work over the numbers and ensure that you will be able to pay back the loan plus the interest straight away. Otherwise, you are left without a car.
Search out some sort of debt relief program, oftentimes there are services that help you to relieve your debt through better interest rates and longer payment periods. Scour the web for one that will help you out of your current situation.
Disclaimer: Our service is not intended to be, nor should it be construed as financial advice. We help our readers make informed decisions via impartial information and guides. Where appropriate, we may introduce partner companies who can provide services relating to financial products.