For the past five years, the credit markets have tightened to a point that it is near impossible for most people to get a personal loan. While personal loans are difficult to receive, one option to receive a personal loan is to take out a car title loan. A car title loan is a loan that is ultimately secured by the equity in your personal vehicle. While a title loan can be a solution to personal financial problems, there are five tips which should be followed to ensure that you use the loan option successfully.
Use for the Right Reasons
Only use car title loans for the right reasons. Car title loans are easy to obtain and many people may be tempted to use the loan to take a vacation, buy new clothes, or pay for other luxuries. To protect yourself from further debt, you should only use car title loans to pay for financial emergencies, such as paying past due bills, paying for medical expenses, or paying for car repairs.
Understand Total Costs
Prior to taking out a title loan, you need to fully understand the total costs of the loan. Be sure to read all of the fine print of the title loan agreement and be on the lookout for unexpected fees, charges, and other costs. This will help protect you from any surprise costs at loan closing.
Understand Ramifications
Make sure you understand the consequences of not paying the loan back on time. The ramifications for not paying back the loan on time can include paying a higher interest rate, incurring significant late payment fees, or even losing your car. You need to understand what exactly the lender’s remedies to a default are and when they can start acting on the past due loan.
Pay Back as Agreed
Once the loan is finalized, you need to do everything you can to meet all scheduled payments. This will help you avoid paying any excess fees and charges that come with late payments. Paying back the loan as agreed will also guarantee that you receive the car title back once the loan has been paid off.
Develop a Long-Term Plan
It is wise to develop a long-term financial plan. Many people can find themselves in a deep financial hole, which only gets deeper if they do not have a plan to repay the title loans at some point. Before taking out any title loan, you need to have a plan established, which will ensure that you will be able to pay off the title loan and avoid having to take out another loan after it has paid off.
