Auto title loans are short term loans. The most common auto
title loan is a car title loan. The borrowers need to put their car as collateral
against the loan. Borrowers who get title loans must allow a lender to place a
lien on their car title, and temporarily surrender the hard copy of their
vehicle title, in exchange for a loan amount. When the loan is repaid, the
lien is removed and the car title is returned to its owner the lenders who
offer such loans are termed as auto title lenders. It is type of cash advance
which is offered for a very short period of time. The lender decides how much
amount of money he can give and you promise to hand over your vehicle if you do
not repay as agreed. Before you use a auto title loan, make sure you know the
pitfalls. In general, auto title loans are small loans. They are a good deal
for the lender, since they have a good chance of getting all their money back
by selling the asset you pledge. This means that auto title loans are often not
as advantageous for borrowers. You put a lot at risk for a small loan. Rolling over
of an auto title loan can prove to be expensive because the rate of interest
charged on these loans is much higher than in case of the usual loan program. The
interest rate, which is usually charged on a monthly basis, may range from 10%
to 25%. There is one more important thing to note, if you owe anything else on
the car, you will not be able to qualify for an auto title loan. Since it is a
secured loan, if because of any reasons you fail to repay the loan in time, the
lender will take possession of your car and sell the same to recover the loan
amount. Alternatively, the lender may just charge you the amount of interest
for one month and rollover the loan for another one month. You can keep rolling
the loan over and over again for as many months as you want, however this can
become an expensive option. Auto title loans are generally expensive. Before
you use a auto title loan, explore all of the alternatives. Overall, an auto
title loan is the best choice for those who are facing a temporary financial
crunch and are sure that they can repay the full amount within a month.
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