If you are considering a car title loan, and more specifically, getting one online, there are several common mistakes you should be aware of. These are mistakes made by borrowers every day that you can avoid.
Understanding these mistakes, why they are made, the consequences, and, most importantly, how to avoid them, can make your title loan experience better and ultimately save money and avoid future problems.
While there are certainly more than three mistakes you can make when shopping for a title loan, the three we discuss here have the largest impact on the loan. For more information on how to get the best car title loan feel free to visit our site.
Common Title Loan Mistake 1 – Monthly Payment Focus
The first mistake you will want to avoid when getting a title loan, especially one online, is focusing on the monthly payment. What we mean is letting the lender focus your attention on only the monthly payment instead of the total loan cost.
It is no secret that title loans have higher interest rates than most traditional loans. Even the best title loans can be costly if they are amortized over a long period.
By focusing your attention on the monthly payment, instead of the total loan cost, the lender can often get you to agree to a loan that is several times the original principal amount.
This common mistake to avoid becomes more important for loans that are longer than 12 months. Many online title loans are now 24- 48 months and some even longer. We have written several articles about what happens when you try to make a title loan a long term loan.
In short, the higher the interest rate, the shorter you want to keep the loan. Our car title loan calculator allows you to compare different lengths and amounts.
Mistake 1 Example
We have several more examples in our title loan costs article; but to help illustrate we’ll provide one below. The example loan is a $1,000 loan with an interest rate of 15% per month.
|Loan Length||Monthly Payment||Total Loan Cost|
As you can see from the table focusing on the monthly payment instead of the total loan cost can have a significant affect on the cost of the loan. A 48 month loan costs 7 times the initial loan value for a loan with a monthly rate of 15%.
What is worse, the monthly payment for the 48 month loan is only slightly less than the monthly payment for the 24 month loan. This is why this mistake is critical to avoid. Make sure to always to the total loan lost into account when getting any title loan.
Common Title Loan Mistake 2 – Rushing into the Loan
Another very common mistake is rushing into the loan without performing the right preparation. Often, borrowers assume all title lenders are similar and therfore choose wither the closest title loan place or the first result in a web search.
The reality is that every lender is different. In fact, some lenders are very different. Interest rates, fees, terms, and requirments vary from lender to lender. This makes the loan you get from one lender very different than the loan you get from another lender.
With the increased number of online title loan companies, this makes this step more important than ever.
Lenders Count on Rushing
Some title lenders count on borrowers rushing the process. This is how some of the loans with the most unfavorable terms are entered into. When you are trying to solve an urgent financial problem, the last thing you want to do is spend time finding the best title loan company.
Lenders know you are in a hurry and have an urgent financial matter to attend to. This means often you are not thinking about the loan but what you will immediately do with the proceeds (attend to your financial matter).
Take a minute, think, and don’t rush through the loan. Pay attention to details; they may have a significant affect on your long term financial situation if you rush into a very costly loan.
While this can be difficult it is well worth spending even a few minutes doing some research. We suggest getting multiple quotes from lenders to help ensure you are getting the best deal.
Common Title Loan Mistake 3 – Not Reading the Loan Agreement
The third and final common mistake we’ll be discussing today is one we mention frequently. It is not reading the loan agreement in full. It is essential to read and understand the entire loan agreement before signing.
This is a very common msistake. It is related to the first two mistakes and simply correcting this can save you from an unfavorable loan.
The Title Loan Agreement is Key
The car title loan agreement is the document that spells out how the loan will be governed. It will have the cost details, payment frequency, what fees can be charged and why, as well as a number of other key items like what constitutes a default.
Remember car title loans are secured loans. Defaulting can result in repossession of the vehicle. The loan agreement will define when the lender may repossesses the vehicle, should you default, and what you can do to recover the vehicle if this does happen.
Make sure you read every clause in the loan agreement and understand every term. If there is something you don’t understand ask. If you don’t get a satisfactory explanation move on to another lender.
Many title loan customers often forget that they are the customer and the lender needs their business. The lender on the other hand would prefer customers think that the lender is doing them a favor by making the loan. This is the exact opposite. The lender needs borrowers to stay in business.
Getting a car title loan is a stressful and difficult process for many borrowers. The fact that many borrowers need the loan for an urgent expense only makes things more difficult. Preparation for a title loan is key; even if you have minimal time.
Avoid the mistakes that other borrowers have made to ensure you get the best possible title loan for your situation. Take a step back, think, and find the loan that best suits your needs. If you find yourself reading a loan agreement with terms and conditions you know are not favorable, move on to another lender.