Car title loans are a fast and easy way to borrow money. They allow you to use your vehicle’s equity, instead of your credit score, to borrow funds quickly. They are usually very fast and easy to obtain. Consumers often use them to cover emergency or unexpected expenses.
For some, car title loans can be lifelines to cover funding shortages that otherwise could not be met. For others, they can become long term financial problems that can take years to recover from. Determining whether or not a car title loan is worth it prior to committing to one can save you from the long term problem.
Being in the position where a title loan is needed is stressful. Finding a decent title lender can be a challenge, and finding the best title loan takes some research. Before spending this time and effort, first figure out if a car title loan is worth it for your specific situation.
How to Determine if a Car Title Loan is Worth It
So, how do you determine if a car title loan is worth it? Also, if you do decide to get a car title loan, how do you make sure it does not become a long term problem?
There are a few things you can do to make sure this doesn’t happen. You need to be able to answer the question “is a title loan worth it” with a yes with no hesitation or doubt. We’ll cover the most important topics in this post.
Car Title Costs and Benefits
As with everything in life, there are both costs and benefits associated with car title loans. To be worth it, the benefits associated with the car title loan need to outweigh the costs. Preferably, they should significantly outweigh the costs.
Car Title Loan Benefits
The benefit of the car title loan is defined by the reason for the loan. This will not change regardless of the lender you choose. Sometimes the benefit can be hard to quantify in dollars but you will need to assign a dollar value to the benefit to perform a realistic cost benefit analysis.
The benefit of paying a medical bill, for example, can be hard to quantify. If paying the bill keeps your credit in good shape and reduces stress, try to assign a dollar amount to that.
A car repair, on the other hand, should be easy to quantify. What would it cost to go without the repair until you could save enough money to have the repair done?
During that time, what would you use for transportation, and how much would that cost? If you can use public transportation, ad up the costs. If you have to take a cab, add up the costs.
Another example is a classic or collector car that you cannot easily replace. These types of vehicles may be appreciating in value and also may have sentimental value.
Quantifying this benefit can be difficult. Is a title loan for a classic car the best choice if it lets you keep the car?
Car Title Loan Costs
To perform a cost benefit analysis you need the cost of the car title loan. This requires contacting a few lenders and getting a few quotes.
To get an estimate you can also use our title loan calculator. Once you have the cost you can compare it to the benefit. Make sure the benefit outweighs the cost. In other words, you will receive a benefit that is more, preferably significantly more, than the cost.
Don’t forget to include fees into your total loan cost. Find out which title loan fees are reasonable.
Unlike the benefit, which will be fixed, the cost may vary depending on the lender you choose. This makes choosing your lender an important factor in whether of not a title loan is worth it.
Find the Best Lender
Doing some research before getting a title loan will help you avoid the least advisable lenders. Not all lenders charge excessive rates. Many do, so finding several that don’t will help ensure your title loan is affordable.
Remember, title loans are secured loans. this means you can lose your vehicle if you default on the loan. Make sure you can afford the payments without question. Then, focus on finding the best title loan company for your situation.
Car Title Loan Length
Car title loan costs are driven by the interest rate associated with the loan, the fees, and the loan term. We recommend getting several quotes and choosing the best.
This will help make sure you find a reasonable lender with competitive interest rates and fees. This does not, however, address the loan length.
As the loan term is increased, the interest charges increase. This affect is greater as the interest rate increases. Keeping your title loan as short as possible will save you a significant amount of money on interest charges.
Try to keep the loan to 12 months or less. Today, there are online title loan companies offering loans for three and even four years. Costs can be substantial when you try to make a title loan too long.
Title Loan Payments
Once you get a title loan you will be required to make payments. For most online title loans these payments will be monthly. To be worth it make sure that you can make the payments, every month, on time with no problem. This includes both the payment amount and the payment method.
If you prefer to make your payments online, make sure your lender accepts payments online. Likewise, if you prefer mailing a check, make sure your lender accepts checks.
Tips for getting a Title Loan that is Worth it
There are a few things every consumer should do when shopping for and getting a title loan. We cover how to get the best online title loan in detail in a previous post, but will reiterate a few important steps here.
- Shopping for a title loan should be like shopping for something expensive. Get several quotes from lenders.
- Do some research on your lender before visiting them. Find out how they treat their customers.
- Make sure you meet the requirements before applying. This will save you time and effort.
- Read the loan agreement in full before signing. If you don’t understand or agree with something, ask.
- Finally, don’t rush. Take your time, read everything in full, and make sure you are comfortable with the loan.
Is a Title Loan worth it? The true answer is sometimes. In some cases the loan will be well worth it. In others it will be a big mistake. Every customer needs to take the time to make the right decision for their situation.
Always define the benefit received from the loan. Then, make sure it outweighs the cost.