An auto title loan allows you to raise finance using your car. This means that you can borrow money by putting your car up as collateral. The lender retains the title of your car until your loan is duly repaid. As with all other types of loans, an auto title loan has certain benefits and drawbacks.
Pros
• You can get quick cash. If you are a car owner and draw a paycheck, getting an auto title loan is easy. You can even apply for one online; the only things you require are your driver's license, proof of residence such as an electricity bill, and your last pay slip. Once your title of the car is verified, your loan is approved. You can get the money in hand within 24 hours.
• Your credit history does not matter. Typically, lenders do not approve loans to applicants with a bad credit history. However, with an auto title loan, bad credit is not a disqualifying factor. This makes it ideal for people with such a record.
• You can continue using your car. The car remains in your possession during the repayment period, even while you are still paying back the loan.
Cons
• You could be deceived. The idea of ready cash projected by these loans is very attractive. It may induce you to go in for them without anticipating the actual risks involved.
• You pay higher interest. An auto title loan generally carries high interest rates. Besides, every time the date of repayment is extended, this rate rises. Overtime, your total debt may be much more than your original loan.
• You could lose your car. In case of failure to repay, the lender is entitled to sell off your car to recover his dues. In this case, the lender also keeps the excess over and above your debt amount. While this is a worst-case scenario, it is a real risk.
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