We won’t ever have to worry about money in a perfect world because we could all afford everything we want. But in the real world, that’s not the case, and there are times we need to borrow money from lenders to make ends meet. That’s a sad reality for some, even for those working two full-time jobs to feed themselves and their family. Because of that, some unintentionally ruin their credit score due to poor financial choices. It’s okay. You can still fix that. But it will be hard for you to loan another amount from traditional lenders.
Thankfully, there’s another way you can loan money, and that’s through a title loan. But different states have different title loans laws, so you need to check the Alabama title loan laws first before going ahead and applying for one. You also need to understand what a title loan is, so read on to know more about it.
A Simple Explanation as to What a Title Loan is
If you haven’t heard of a title loan before, it’s pretty simple. It’s a kind of loan that requires you to use an asset as collateral. Most of the time, consumers use their car as collateral to apply for a title loan. It’s very popular for many reasons, but here are the two main reasons. First, the consumer’s credit score is not taken into consideration. So if your credit score is terrible, you can still take out a loan through a title loan as long as you have an asset that you can use.
Another reason why title loans are popular is that the requirements are looser compared to traditional loan requirements. For example, your loan application can be approved within 24 hours for loan amounts as low as $100. But of course, since your asset is used as collateral, you need to make sure you pay for the loan on or before the deadline so the lenders won’t take your asset away from you.
How Does a Title Loan Work?
Let’s have an example. In most cases, a consumer will have their car as an asset and will use it as collateral for their title loan. In this case, the consumer has to own the car and have the title of the car with them. They need to submit or sign over the title of the car to an auto loan company. They will then lend up to 25% of the car’s total value to the borrower and keep the car’s title as collateral in case of default.
Most car title loan amounts are $1000 or higher in some cases. The usual length of the loan is 15 to 30 days, though it can be longer than that. The borrower has the choice to pay for the loan in one single payment, or they can pay in a multi-year installment plan. And if the borrower doesn’t pay back the loan on the agreed time, their car will be repossessed by the auto loan company. So if you’re planning to go down this route, you need to make sure only to borrow the amount you know you can pay for.