The Basics of a Car Title Loan
A car title loan is basically a type of debt that is given with the title of the vehicle serving as the collateral. This type of loan is popular because it is easier to get compared to a conventional loan, such as a bank loan. The length of time needed to get hold of the loan amount is much shorter because it may take less than one hour. Moreover; a credit check is not required because the primary basis for the title loan is the price of the car if it is sold in the current market.
However, it should be noted that you would not be able to obtain a car title loan amount that is equivalent to the selling price of your car. Most companies set the maximum amount to 50 percent of this value although some may offer a slightly higher amount. However, it should be noted that some states have forged certain regulations regarding the car title loan. For example, in Illinois, there is a maximum loan amount and this is $4,000.
The loan processing fee for a vehicle title loan cannot be more than $75 if the loan amount does not exceed $5,000. However, there is ceiling for the fee for a loan amount that is beyond $5,000. In Illinois, another government requirement is that the monthly payment cannot exceed 50 percent of the borrower’s gross income each month. Balloon payments are also not permitted so that installments should have the same value. Moreover, it is possible to roll over the loan only if at least 20 percent of the principal has already been paid.
Consumers usually want to apply for a car title loan to handle unexpected bills, such as medical expenses. For those who have poor credit scores, this kind of loan may also help in their goal of gradually improving their credit rating until they are finally able to obtain approval for conventional loans. Conventional loans, including bank loans, have lower interest rates but they require a minimum credit score.
The requirements when applying for a car title loan is relatively simple. The borrower must show proof of identity, such as a driver’s license or a Social Security number. The company may also ask for proof of income through bank statements, pay slips or tax returns. The car title should also be presented and it must be shown that there no loans using the car title as collateral. Finally, the finance company may want to have the vehicle inspected physically to ascertain its market value. Click Here for more information.