Needing a title loan is a difficult place to be in. Before getting a car title loan we recommend making sure you are a good candidate for one. Despite what some lenders would have you believe; car title loans are not the answer to every financial problem.
To be a good car title loan candidate the loan needs to be worth it to be a good decision. Perform a cost benefit analysis to make sure the benefit received from the loan outweighs the cost.
The best title loan companies tell people when a vehicle title loan is not the right choice. For many customers title loans are not the answer, and, in some cases, can even become a problem instead of a solution. This is especially true when the loan is not affordable.
What makes a Good Title Loan Candidate?
What does it take to be a good title loan candidate? The answer is there are criteria that borrowers should meet to be considered good candidates.
We go over these in detail in the following sections. These criteria include:
- Loan Amount
- Vehicle Value
- Repayment ability
- Title Loan Requirements
Before moving forward with a car title loan make sure it will improve your financial situation. Remember, car title loans are not long term solutions.
It is important to remember that car title loans are meant to be short term solutions. Trying to make a title loan a long term solution can result in a very expensive and costly repayment schedule. This can turn a small financial problem into a larger one.
Criteria for Title Loan Candidates
There are several criteria that should align to borrower’s requirements before proceeding with a title loan. Examine each and make sure you make a good candidate by meeting the following criteria.
1. Car Title Loan Amount
The car title loan amount needs to accomplish two things:
- Cover the expense that led to needing the title loan; and
- Result in a loan with a monthly payment you can afford.
If the title loan amount does not cover the expense you need the loan for; you may not be a good title loan candidate. Additionally, if the loan does not result in a monthly payment you can afford, then a title loan may not be the right choice.
To get an idea of different payments for different loan amounts and terms, use the car title loan calculator. If you find a loan amount that meets your needs, with a payment you can afford, you may be a good candidate for a title loan.
If the amount is small (less than $500), than a Payday Loan or Payday Alternative Loan may be an option. These loans do not require using the vehicle as collateral.
Many car title lenders limit title loans to $10,000.00. If the loan amount is more than this, you may want to look into an alternative or find a lender with no pre-set limit.
2. Vehicle Value
The vehicle value needs to support the loan amount from the previous step. Usually title loans are limited to 50% of the vehicle’s fair market value. So, to be a good title loan candidate, your vehicle should be worth at least twice the loan amount needed.
To get an idea of your vehicle’s value perform an appraisal and use one of the online valuation tools like KBB or NADA. The vehicle can be a car, truck, SUV, and even motorcycle title loans are available in some cases.
If the loan amount needed to cover your expense is $4,000.00, then you will need a vehicle worth at least $8,000.00. You are probably not a good title loan candidate if your vehicle is not worth enough to cover the loan amount.
3. Repayment Ability
You will need some way to repay the loan. Losing your car, truck, or motorcycle is a possibility, so the ability to repay the loan is important. If you have any doubt about your ability make your payments then consider other alternatives.
Funds to repay the title loan can come from any source; even the vehicle itself. This makes it possible to get a title loan without income verification if necessary. If you have no way to repay the title loan, then you are not a good candidate.
4. Title Loan Requirements
Finally, to be a good car title loan candidate you will need to meet the online title loan requirements. These include a vehicle with equity, lien free title, drivers license, proof of insurance, and vehicle pictures.
If you cannot meet the title loan requirements, then you are not a good title loan candidate.
Title Loan Candidate Checklist
You can use the following checklist to help determine whether or not you make a good candidate for a car title loan. Remember, title loans are meant to be short term solutions. The goal is to avoid getting a title loan and having it cause a long term financial problem.
|Vehicle Value Supports Loan?|
Loan Results in Affordable Monthly Payment?
|Vehicle is worth 2x Loan Amount?|
Vehicle has no Liens?
|You have ability to repay?|
The Loan is Affordable?
|Title Loan Requirements:|
|You meet the requirements?|
Finding out whether if you are a good candidate will help avoid getting stuck with a loan you can’t afford.
Even the cheapest title loans with the lowest rates can be costly, especially when compared to other loans. To determine if a title loan is the right choice, weigh the costs versus the benefits.
Benefits should always outweigh the costs to be a good decision. Make sure you are a good candidate for a title loan and that your financial situation will improve.