Car title loans can have a pretty bad reputation depending on who you ask. They are often compared to payday loans when it comes to high interest rates, predatory nature, and the fact that they are primarily targeted towards people who are in the midst of a financial crisis and are therefore somewhat desperate. While all that can be true, it is important to remember that how your car title loan works for you is heavily dependent on how responsible you approach it.
So what are the main knocks on car title loans, and how can you avoid them so your loan ends up working for you and not against you?
Understand What It Will Take to Repay the Loan
Before you sign the contract for your title loan, make sure that your read the terms and conditions so that you understand the rates and fees that are attached to your loan. Knowing this information is crucial to being a responsible and intelligent borrower and will help you calculate how much money you will really need to have to repay the loan by the end of your payment term.
For example, if your lender charges a 20 percent monthly interest rate (the average is actually 25 percent) and you borrow $1,000 for one month, that means that you will need $1,200 to pay back the loan off. That is $1,000 for the entire loan with an added $200 for the 20 percent interest.
If you are unable to pay back your loan within the payment term, your lender will most likely agree to let you roll over your loan for another month. It is important to know that doing so will only add to the interest fees and other fees you already owe.
Make Sure to Research Your Lender
Look for a title loan lender that is willing and able to work productively and respectfully with you. You should do the research to find the best interest rates, customer testimonials, length of existence, and more. All of these things to look for as signs that you are signing up with the right tile loan lender. A lender with many positive reviews such as True Financial offers loans online in 24 hours.
Know How to Adjust Your Budget
After you take out a car title loan, it is completely on you to be able to pay it back within your payment term. That means that it’s up to you to figure out how you are going to budget for you to be able to pay back your car title loan. One option available to you is to work more hours at your current job or get a side job so that you can make more money. Another way to get the money is to hold a garage sale or start selling things you no longer use online.
Another possibility is to simply look at your current budget and see where you can cut your spending for a month so that you have more money in you account by the time your payment term ends. Consider eating out less, or cancelling online subscriptions. Remember, this kind of cost cutting doesn’t have to last forever, it just has to last long enough so that you can have the money you need to pay back your car title loan.
Another thing to consider is changing your tax information so you get more money back on your paychecks. It could lead to you owing money by the end of the year, but it will certainly help you pay back your loan.
Keep in Contact with Your Lender
This is especially important if you are beginning to come to the realization that you are either going to be late on your payment or simply do not have the money to make it. That does not mean, however, that it is not wise to keep in contact with your lender throughout the life of your loan.
Still, if you do come to realize that you will not be able to make your payment, contact your lender as soon as possible. They will likely be able to work with you either by extending your term, lowering your interest rate, or coming to some kind of settlement. They will only know you need that kind of help if you tell them, though. So, that is exactly what you have to do.
Car title loans have a very bad reputation, and while some of that may be deserved, it is also a product of how people treat them. If you treat it like a free handout, you will certainly feel the burn when your payment term comes to an end. If you are able to treat with responsibly, on the other hand, you could very well reap the benefits of this small personal loan, and avoid all of the negative outcomes that less responsible borrowers face.