Car title loans can be somewhat controversial. Search for title loans and you’ll find plenty of articles and blog posts detailing the negative aspects of these loans.
Some of the criticism is valid, as there are some lenders that do take advantage of those in need of money fast and charge excessive rates. There are, however, lenders with better rates. They provide a needed service to individuals without a ample savings to cover unexpected expenses.
Many of the title loans that result in excessive costs could have been avoided if the borrower performed a few key preparation steps prior to entering into the loan.
This article will focus on performing the top three key activities to help ensure you do not end up with an excessive title loan that is difficult or impossible to repay.
Item 1 – Cost Benefit Analysis
The first item that needs to be performed prior to getting a title loan, or any loan for that matter, is a cost benefit analysis. Essentially you want to make sure the benefit of getting the loan outweighs the cost of the loan.
This is sometimes easier said than done, especially when you don’t have the actual cost of the loan. Get a title loan estimate using the calculator if needed. Also, contact a couple of lenders for a quote. This will help make sure you have a reasonably accurate cost estimate to use in the analysis.
Once you have the cost, or at least an estimate, compare that to the benefit provided by getting the title loan. It may not be simple or straightforward to quantify the benefit in dollar figures, but do your best. Some examples of a title loan cost benefit analysis may be useful for this exercise.
If the cost of the loan outweighs the benefit, then it would be a good idea to look for other options and alternatives. If the benefit outweighs the cost then a title loan may be a good choice for your situation.
Item 2 – Value the Vehicle
Car title loans are secured by the vehicle and the vehicle value is what is used to determine the max loan amount. Make sure you understand how much your car is worth prior applying so you know what to expect.
Valuing a vehicle can be done online using a variety of different tools. Remember that vehicle history plays a factor so now may be a good time to check your vehicle history if you haven’t done so. Find out more about car values for title loans.
Item 3 – Gather Information
If the cost benefit came out in favor of the loan, and the vehicle value supports the loan amount, the next critical item to perform prior to getting a title loan is gathering the required information. This can be broken up into two categories:
- In-person Loan Information
- Online Title Loan Information
In-Person Information
For an in person title loan make sure to bring the necessary documentation with you. This will help ensure you leave with cash in hand, rather than having to go back and collect the documents needed to get the loan approved. These include:
- Lien free title
- Drivers License
- Insurance information
- Proof of income
This is typically enough to get your title loan approved, but make sure to contact the lender you choose before visiting them in case there are additional requirements.
Online Information
You’ll need the same information for an online title loan as well as a few items in addition. The one thing to remember is you will likely need to upload your documents, so having a digital copy or an image (either a scanned document or even a picture) will be needed.
The additional items include vehicle pictures of the:
- Exterior
- Interior
- VIN
- Odometer
The pictures should be clear and the picture of the odometer should be readable to show the actual miles on the vehicle.
Summary
Before getting a title loan it is important to:
- Analyze the cost/benefit of the loan to make sure it is worth it
- Know what your vehicle is worth
- Gather the required documentation
Performing these three actions will help prepare for the loan, or help make the decision that the loan is not worth it. Either way it is better to have this knowledge before contacting a lender to move forward with a title loan.