If you are searching for a car title loan you will want to learn how to get the best deal. Unlike payday loans which have a fixed fee, car title loans are based on interest rates that, with many lenders, can be very high and costly. Car Title Loans are often thought of as expensive loans, and for good reason. When compared to other sources of credit, like credit cards and home equity loan, car title loans are expensive.
Additionally, many lenders still charge very high rates (even for title loans), and it can end up costing you double or even triple what you borrowed to repay. This means a $2,000 loan can cost $4,000 or even $6,00 to repay. This is why people ask “are title loans bad?“. Well, if it costs $4k-$6k to borrow $2k, it certainly isn’t good. So, how do you get the best deal on a title loan? To get the best deal, we need to understand what makes title loans cost so much and how to avoid the lenders that charge very high rates.
Title Loan Cost Drivers
To get the best deal on a title loan, first you need to know what the major cost drivers are causing the loan to be expensive. These can be broken into two categories: Interest charges and Fees. So, to learn how to get the best deal on a title loan, first we’ll start with the interest rate. The interest rate for a title loan varies significantly from state to state, lender to lender, and sometimes even within the lender. Some lenders charge different rates based on the loan amount.
How to get the Best deal on a Title Loan – Interest Rate
To get the best deal in a title loan you will want to find a title loan with the lowest interest rate. This is easier said than done, as many lenders do not advertise their rates. You will want to find several lenders in your area and call them to find out what rate they charge. If they will not tell you what rate they charge, they likely charge the state maximum (found here) and you will want to move on too another lender.
Once you have rates from a few lenders, write them down and compare them. You will want to make sure to compare the same type of rate. Most title loans are quoted in monthly terms. Just make sure to compare monthly with monthly and APR with APR. To convert from monthly to APR, simply multiply by 12. You can also use our Title Loan Calculator to compare lenders. This is step 1, as the other cost driver is fees. Before we move on to fees, first a note on different rates within a lender.
Title Loan Interest Rates – Different Rates for Different customers
A tactic by some lenders is to advertise one interest rate and charge another. They do this by requiring borrowers to “qualify” for the lower rate that they advertise. Generally, to qualify, you need to have a decent credit score. Since most title lenders do not check your credit, we think this is a bit disingenuous and is simply a way for the lender to advertise a lower rate while charging a higher rate. Our recommendation, for getting the best deal on a title loan, is to steer clear of these lenders.
Cost Driver 2 – Title Loan Fees
Now that you have several interest rate quotes from several lenders, the next step in getting the best deal is finding out what fees each of those lenders charges. In our view, there should only be one fee associated with a title loan. That fee is the actual cost of the lender recording the lien on your title. This is a fee they must pay, and it is not unreasonable to charge the borrower for that fee. It varies from state to state but us usually not significant.
When you call several lenders to get their interest rate, also ask them about what fees they charge. Write them down nest to each lender. As mentioned, the best deal on a title loan will include no fees (other than maybe the lien fee). If there is a loan origination fee, convenience fee, fee to make a debit card payment, pre-payment fee, monthly roadside assistant fee, or any other fees that are excessive we suggest avoiding these lenders. There are plenty of lenders that do not charge these fees. If you do go with a lender that charges more than just a lien fee, ask for all other fees to be waived.
How to get the Best Deal on a Title Loan – Negotiate
Now that you have contacted a few lenders, and have their interest rate and fee information, you should have a good idea of which one is the best deal. But, to truly get the best deal, don’t stop there. What most people don’t realize is that title loans are often negotiable. This is especially true if you have several lenders in your area. Get the best rate and lowest fees, and then call another lender and ask them to beat this rate. If they do, contact the third lender and do the same, Continue this process until you have the absolute best rate from each lender and then make your decision. As mentioned, there is a maximum a lender can legally charge, but no minimum. It is not unusual for title lenders to negotiate rates.
The process for getting the best deal on a title loan is similar to any other product or service you would shop around and negotiate for. A title loan is no different. Lenders charge various rates and fees, and it not out of the question to try to get the lender to lower their fees for you. This can end up saving you a significant amount of money over the loan term. This is especially true if you are looking for a large title loan. With a large title loan you also have more leverage to negotiate.