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Vehicle Title Loans: How to Get Approved?
Now you can listen to our blog, “Vehicle Title Loans in Canada: How to Get Approved?” while on the go.
You might be tempted to take out a car title loan if you’re short on cash and own a car. While title loans are a quick way to borrow cash, they are also costly and can lead to more issues. Here are how title loans work and some things to think about.
Are title loans, on the other hand, a decent option to secure a rapid loan? They may appear enticing because of their short processing timeframes, which allow you to receive funds immediately. However, you should think twice before taking out a title loan because they might have high-interest rates, making them costly.
A car title loan is similar to a payday loan in that it is a modest loan with a short repayment period, usually 30 days. You give the lender the title to your car in exchange for the loan until it is fully paid off.
Title loans are enticing since they don’t normally involve a credit check, the application procedure can take as little as 15 to 45 minutes, and you can keep driving your car while you apply. However, borrowers should be aware that title loans might lead to financial difficulties.
What is the Pre-condition of Getting a Title Loan?
You must have equity in your automobile to qualify for a title loan. Many lenders demand that you own the car free and clear, which means you don’t owe anything on it.
What is the Maximum Amount You Can Borrow with a Title Loan?
Typically, you can borrow between 25% and 50% of the car’s worth. The average loan amount, according to the FTC, is $100 to $5,500, but some lenders may let you borrow up to $10,000 or even more.
You’ll provide the lender the title to your car once you’ve been approved for a loan. Although you are free to drive your automobile, certain lenders may install a GPS tracking device. They may also produce a duplicate of your keys.
Disadvantages of Title Loans
While title loans may appear to be a fantastic solution when you need quick cash, they have significant disadvantages.
1. High Cost
Title loans are expensive, with an annual percentage rate (APR) of about 300 percent in most cases. This translates to a monthly interest payment of 25% on average. For example, if you borrow $1,000 and pay 25% monthly interest (also known as a monthly fee), you’ll owe $1,250 after 30 days — and that amount doesn’t include any additional expenses you’ll almost certainly have to pay.
So, while these short-term loans are costly, the situation is just getting worse.
2. Result in a Debt Cycle
If you can’t pay off your loan in full at the end of the term, the lender may offer to renew or roll it over into a new loan. This new loan will increase the amount you owe by adding more fees and interest.
Let’s imagine you borrowed $1,000 with a 25% interest rate, but you could only pay back $250 after 30 days instead of the entire $1,250. If you accept a rollover loan from your lender, the $1,000 you still owe will be rolled into a new loan with higher interest and costs.
Assuming the same interest rate, you’ll be owing $1,250 in 30 days. If you repay the loan in full at the conclusion of the 60-day period, you will have paid $500 for a $1,000 loan. (Again, this does not include any expenses you may incur.)
Read: Car Loans in Canada: Should I Get One?
Borrowers, unfortunately, spend more in interest and fees than they borrow on average. According to a 2015 survey from the Pew Charitable Trusts, the typical title loan is $1,000, while the average costs paid per client per year are $1,200. Borrowers who can’t afford to pay off their debt in full may confront a new problem as expenses mount month after month. Your vehicle is a danger of being repossessed.
You risk losing your car if you can’t pay off your loan in full at the conclusion of the term. According to a survey by the Consumer Financial Protection Bureau, one out of every five persons who have to roll over their title loans has their car repossessed.
If you can’t keep up with payments as outlined in your loan agreement, the lender has the right to repossess your car, even if you’ve been paying partial payments.
Is it Possible to Get a Vehicle Title Loan without Proof of Income?
If you don’t have traditional evidence of income, don’t fret about getting approved for a title loan. You could instead employ various sources of revenue, such as: If you’re self-employed, you’ll need your tax returns or bank statements.
You may believe that title loan eligibility is out of reach if you are currently unemployed, but it is not! If you don’t receive traditional paychecks but you have access to consistent income, you could qualify!
To Get a Car Title Loan, What Documents Do I Need?
While each lender’s specific needs may differ, the following are the minimum requirements:
- Documents pertaining to vehicle titles
- Government-issued identification (such as a driver’s license)
- Documents related to auto insurance
- Vehicle registration is current.
- Proof of address (e.g. utility bills)
- Proof of financial ability to pay (bank statements and/or employment pay stubs, for example)
- Copies of the car keys that work
How Can I Get a Vehicle Title Loan in Canada Approved?
Obtaining approval for a car title loan is far less difficult than you may believe. To begin, find a lender that is a good fit for you. There are numerous companies to choose from, so do your research and select a trustworthy one with reasonable costs.
Most car title loans require you to have equity in the vehicle in issue, as well as some documentation, such as evidence of ownership, driver’s license, proof of insurance, a valid car inspection, and proof of domicile. Furthermore, your vehicle must be no older than eight years old. Once you’ve sent this paperwork to your preferred lender, they’ll be able to evaluate it.
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The Bottom Line
At Lionsgate, we specialize in helping people obtain funding private mortgages for land purchases as well as for other real estate transactions. If you are looking to buy land in Canada, get a mortgage or apply for a loan, leave us a message and we will try to connect you with local realtors and sourcing for financing.
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