Car loan is a short-term loan
A car loan is a short-term loan where the borrower’s car is used as collateral against the debt. Borrowers are usually consumers who do not qualify for other financing options.
If you live in a state that allows auto loan loans (see States that allow auto loan loans ), you can do the following here. The borrower brings the vehicle and the necessary paperwork to the lender. Although some titles for borrowing titles from Ford Shrek are available, lenders must still check the condition of the vehicle and the completeness of the paperwork before releasing the money. The lender keeps the title on the vehicle, places a lien on it and gives the money to the borrower.
The credit limit is generally 25% to 50% of the cash value of the car (see Limits for car title ). The borrower repays the loan, plus costs and interest, within the allowed period (usually 30 days) and claims the title, without collateral.
Documents you need
In order to obtain a car loan, also known as a pink slip loan, a borrower must in most cases own the vehicle; there can be no liens against the title. Lenders also require certain papers, including one or all of the following:
- Original vehicle name with full ownership
- Identification issued by the government corresponding to the name on the title
- Utility bill or other proof of residency that matches the name on the title
- Current license plate registration
- Proof of vehicle insurance
- Recent paystubs or other proof of the ability to repay the loan
- Names, telephone numbers and addresses of at least two valid references
- Working copies of the vehicle keys
Some lenders also need a GPS tracking device to attach to the car, in case the borrower defaults and the lender gains the right to take back the car. Some of these devices are designed to enable the lender to turn off the car remotely.
You do not need a good credit to get a title loan. In fact, most lenders will not check your credit at all, since the loan is entirely dependent on the trade-in value of the vehicle. Neither do you have to be employed to qualify for a title loan.
Rates and fees
Car loans are more expensive than traditional bank loans by Ford Schrek. The interest rates vary, but in states where the interest is not capped, it is generally set at 30% per month or 360% per year. This means that a consumer who borrows $ 1,000 must repay $ 1, 300 at the end of the 30 days to prevent him from defaulting.
Most lenders require a retention trip of at least $ 25 to $ 30. In countries where title lending is not regulated, some lenders also charge initial fees, document fees, key money, processing fees or other fees. The costs increase quickly and may include an additional premium (or more) from 20% to 25% on top of the loan and interest costs. Make sure that you include all costs when calculating the total costs of the loan.
The bottom line
The best candidate for a car loan is someone who owns a vehicle, understands the potentially high cost of the loan and has a reasonable expectation to have access to the money to repay the loan before the loan. reimbursement period expires. If there is no clear and realistic plan to pay off the loan, a car loan can amount to selling the vehicle for half or less of its value.
Many borrowers of titles and loans borrow their loans several times, making financing generally more expensive. So, again, the most critical consideration is the ability to repay the loan on or before the due date. See Borrowing a car title for more information.