New light vehicles in the US now cost over $40,000 on average. Compared to January 2020, that’s 5.5% higher.
Considering how expensive vehicles are, it’s easy to see how they can be a quick source of funds. After all, these are liquid assets with high, constant demand. The fact that some 40 million used cars get sold in the US each year is proof of their value.
So, if you find yourself strapped for cash, know that your vehicle may help tide you over. However, rather than selling it, you can get a car title loan online instead. This way, you can acquire the funds you need while retaining ownership of the vehicle.
Besides, applying for a title loan won’t take days; you can finish it in about an hour or so. We’ll give you a rundown of what you need to do to apply, so be sure to read on.
- Determine How Much To Borrow
One of the first things most car title loan providers ask customers is the amount they’d like to borrow. They refer to this as the “loan principal.” The principal amount is only the initial size of the loan; it doesn’t include fees and interest yet.
Auto title loan providers base the maximum loan principal on a motor vehicle’s value. It depends from lender to lender, but most offer principal amounts ranging from 25% to 50% of a car’s actual value. So if your vehicle is worth $5,000, you may be able to borrow $1,250 to $2,500.
Keep in mind that the higher the principal amount, the more you’ll pay toward interest. That’s why it’s vital to determine how much you need and not just how much you can borrow. If you only need $1,000, then it’s best that you only apply for that amount.
- Compare Annual Percentage Rates (APRs)
According to this title loans for beginners guide, a loan’s APR gives you an idea of how much a loan costs within a year. You’ll see this in percentage form, and it includes the principal and other charges. Depending on where you live, title loan APRs can be in the three-digit range.
In states where three-digit APRs on title loans are legal, the rates can range from 200% to 300%. There are even a few states, such as Utah and Wisconsin, without any cap or restrictions on APRs.
So, before you apply for an online car title loan, take the time to compare the APRs of several lenders. Even a small rate difference can already mean saving a few bucks to even a few hundred dollars.
- Prepare the Paperwork and Requirements
Car title lenders require borrowers to present a clear or lien-free title. A lien-free title doesn’t have any outstanding loans on it. A perfect example of a lien is a car loan used to finance the purchase of a vehicle.
If you’ve completed all your auto loan payments, your title should already be clear. The title should state something like “lien satisfied” or “none” under lien holders.
Moreover, the title should be under your name. Your name’s spelling on the title should be the same as what’s on your valid state driver’s license. Speaking of which, lenders will also ask to see your driver’s license.
Car title lenders typically require proof of vehicle insurance, too. You may also have to provide a duplicate set of car keys.
Since title loans are a form of secured loan, some lenders don’t require proof of income anymore. Some still do, so it’s best to prepare your income and financial documents. These can be your recent W2, 1099, or tax return form, pay stubs, or bank statements.
- Complete the Online Application Form
These short forms would only ask for a few personal and vehicle-related details. These include your complete name, email address, and contact number. Lenders then base the initial principal amount offer on your car’s year, make, model, and series.
After submitting your form, expect the lender to get in touch with you in about an hour or less. They will inform you of your application status, and if approved, they’d ask you to go to their office.
- Bring Your Vehicle to the Lender’s Physical Office
Even if you apply for a car title loan online, you still need to show your actual car to the lender. That’s because they need to evaluate the condition of your car. It’s during this phase of the application wherein they’d give you an exact loan offer.
Since lenders will look at your car’s condition, it’s a smart idea to spruce up your ride before you head out. Even just a car wash can help make it appear more attractive to the eyes of lenders.
- Read the Entire Contract
Federal laws require car title lenders to provide a written statement of loan terms. Aside from the APR, the terms must also disclose specific finance charge details. All these lender obligations are under the federal Truth in Lending Act (TILA).
Read everything in the contract before you sign the dotted line, and pay close attention to the APR. Look at the breakdown of the other charges, too, such as processing and documentation fees. If there’s anything you don’t understand or the lender failed to explain, don’t be afraid to ask.
Only sign the contract if you’re certain you can pay back the entire loan on its maturation date. Furnish the paperwork and other requirements you prepared beforehand.
Once you and the lender signed the contract, you’ll get your cash. You can then drive back home, pay your bills, or do some grocery shopping using your loan funds.
Time To Apply For an Affordable Car Title Loan Online
As you can see, applying for a car title loan online won’t require much effort on your end. However, you do need to be extra careful, considering how expensive these loans can get. So, be sure you take the time to compare APRs to find a low-cost loan you can easily pay on time.
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