The addition of more online title loan companies offers customers more options that previously. This has both advantages and disadvantages.
The main advantage is the addition of competition which should lead to lower interest rates. We use the word “should” here because unfortunately that is not always the case.
The main disadvantage is that it does add some complexity to the already stressful and confusing process of shopping for a car title loan.
In this post we will go over the key items to compare to make sure you get one of the best car title loans from a decent lender.
For purposes of this post we will assume that you have already developed a list of lenders that you can quickly contact or apply with when you’re ready. You will want to make sure you are dealing with a real and reputable title loan company.
Key Title Loan Metrics
We need to have some metrics to compare before we can start. There are a few that will have a major impact on your title loan. These include interest rates, fees, funding times, and total cost.
Title Loan Interest Rates
The interest rate is one of the most important factors for any loan. Car title loans generally have higher rates than other secured loans which makes them even more important.
This does not mean that you have to pay triple digit rates or even higher. There are plenty of lenders offering car title loans with comparatively reasonable rate.
There is one important note that needs to be made regarding interest rates. Most title loans quite interest using the monthly rate. The monthly rate is different than the more common Annual Percentage Rate (APR).
When comparing title loans always compare the same interest rate term. Learn how to convert monthly to APR and vice versa.
The next item to compare is fees. We will break this up into a couple of different categories because there are often multiple title loan fees.
Loan Origination Fee
Some title lenders charge loan origination fees. In some states lenders are not permitted to charge these fees and we recommend avoiding any lender that does. Regardless, when comparing lenders you will want to know what type of origination fee they charge and how it is calculated.
For example, it may be a percentage of the loan amount or a flat fee. Given that some states do not allow these fees, we recommend choosing a lender that does not charge any origination fee.
Processing fees are another way for a title lender, especially one that makes online title loans, to add extra charges to the loan without increasing the interest rate. Again, we recommend dealing with lenders that do not charge processing fees.
Lien fees are to cover the cost of the lender recording their lien on your title. It is common for lenders to charge this fee. They do not keep the fee as profit; instead it is paid directly to the DMV in your state.
The important thing to mate with respect to the lien fee is that ye lender charges the actual amount it cost to record the lien. For example, if it cost $17 to record the lien, then make sure the lender does not charge $100. You should not pay more than the actual cost to record the lien.
Time to Fund the Title Loan
The final metric to look at when comparing online title loans is the time to fund. There are some lenders claiming “60 Second” and “Instant” Title Loans. As we mention in our post on instant online title loans, that phrase is just means a fast online title loan. No title loan is instant and no title loan is funded in 60 seconds.
In fact, some online title loans can take days or even longer to fund. Often, they are funded after the lender receives your title. If you mail them your title and they mail you a check, this can take time. Direct deposit is faster than a paper check; but funding time still needs to be confirmed with the lender when comparing title loans.
Finding the Best Title Loans using the Metrics
Now that we have our metrics defined we simply need to contact the lenders to collect and compare them. We’ll run through a sample below to see how this works. For our sample we will compare three lenders. Then, we will look at the data and choose the lender that works best for our situation.
Title Loan Comparison Table
The easiest way to compare multiple metrics from multiple lenders is by building a comparison table. The following table has a row for each of the metrics and a column for each lender. There is one final column showing the best lender for each of the metrics.
|Lender 1||Lender 2||Lender 3||Best Title Lender|
|Interest Rate||12%||25%||9%||Lender 3|
|Loan Origination Fee||$0||$100||$0||Tie – 1 and 3|
|Processing Fee||$75||$0||$0||Tie – 2 and 3|
|Lien Fee||$15||$50||$15||Tie – 1 and 3|
|Time to Fund||24 Hours||1-2 Business Days||1 Business Day||1|
Additional Cost Comparison
In addition to the completed table it will also help to have detailed cost data related to the title loan. This will make sure we choose the best title loan company for our situation. Since we have the interest rate, getting the cost data is easy with our car title loan calculator.
Simply plug in the amount and interest rate and use the calculator to get the total loan cost for different loan terms. Don’t forget to add the fees collected to the total loan cost (especially if they are different).
Our calculator lets you change the loan term inn months and compare different total loan costs and monthly payments. Make sure to keep your title loan as short as possible. Car title loans are not long term solutions.
Finding the best title loan does require some time and effort. Unfortunately there are still predatory lenders that still operate and charge extremely high rates and fees. Understanding how title loans work and doing the bit of background research can end up saving a significant amount of money.