All You Need to Know About Car Title Loans

Certain states in the U.S. allow Car Title Loans, but not all of them. These are short-term pay-day-like loans which use your car as collateral, however, you get to continue to hold onto your car during the loan period. Some states feel that the lending practices are too predatory and expensive, so they ban the practice. However many states like Idaho will write them for you, because they believe in personal responsibility and nongovernmental interference, but beware because not all Car Title lending terms are alike. Here is what you need to know.

First, the only time a Car Title Loan would work to your advantage is if the car is totally paid off, you are the sole person on the title with no liens or encumbrances, and that the loan they are willing to write is probably worth more than the car you are putting up as collateral. This means a second car, your old beater truck in the backyard, the back-up vehicle that is not driven often and such. The reason for this is simple, you do not want to put any major asset at risk for any reason. Be aware, however, that the lender will want to "inspect" the vehicle before writing the loan, so make sure it appears in tip-top condition and washed before viewed.

Second, the lenders vary from city to city. The closer to the "state-line" the worse the lender. That is because many people drive over from a neighboring state which does not allow the loan to seek quick money in the Car Title Lending State. The predators know this and ask impertinent and inappropriate information on the loan applications, use your personal information for their own gain, or may even ask you to pre-sign away your rights and title to them in advance. No matter how desparate you may be for the loan, forget them and move on to another lender who has a good reputation.

Third, the lender will need your original title and extra key. This is for security and to be able to access the car if the loan goes into repossession or default. For this reason, make sure you have extra keys along. The one you need for the ignition and two additional keys - one for the lender and another in case you should lock yourself out of the car. Make sure the title is up-to-date, with accurate information and with you as the only lien holder. It would be improper to take a loan against a car that you know is not your own or that has some kind of lien or encumbrance against it.

Fourth, understand that you cannot sell the vehicle while the loan is in place. You cannot sell your interest in property that is being held as security for a loan elsewhere. They technically "own" your car until you have paid them back, even though you may still have the right to drive it around. For this reason, I suggest only borrowing the absolute minimum you need, pay it back as early as you can, take the loan for as long a period of time as they allow, and make sure that when the loan is paid back in full, you get a receipt that says "paid in full" and take your title and key back.

Fifth, these are not payday loans, and the monies paid go to interest first and balance last - like a mortgage loan. For this reason, you want to pay it off as quickly and expeditiously as possible. They may allow you a longer period of time to pay back the loan, since it only means more interest for them. It is possible to include these kinds of loans in a bankruptcy or debt reduction plan, but remember, they hold the interest on your car and have a right to repossess.

Last, car title lenders and laws vary from state to state. Make sure you read all the fine print and release your interest only if you feel comfortable risking your precious asset. You never know what tomorrow may bring, for example, the car blows up and becomes worthless, so borrowers be wary. You will be paying a huge interest rate for the cash up front, so make sure your reason for borrowing the money is strictly for an emergency only and a one-time occurrence.