Do Car Title Loans Help Build Credit?

Usually, when we think about applying for a loan, our credit score comes to mind, which will later define how well or badly positioned we are to qualify for a loan. But that is only part of the story because your behavior during the reimbursement period will also affect the rating.

What Happens With The Car Title Loan?

This question arises because many people turn to this kind of financial product when they face an emergency and do not have the savings or common tools like credit cards to cover up at the moment. So let’s analyze what effect they have on your score and other things you need to keep in mind.

How Car Title Loans Work

To put it simply, in this kind of loan, the borrower uses his car to obtain a loan so that it can be qualified as a guaranteed loan. Of course, this does not mean that you leave your car in the hands of a stranger during the reimbursement period, but you must clearly understand that there is a risk of losing the car if you don’t pay.

There is a high risk that you will be left without a car, so it is not a matter of games missing the reimbursement of this type of loan because your life could be very complicated. It is recommended that in these cases, you pay the full amount of the loan as soon as possible.

Although it is a financial tool usually applied by people who think they have no alternatives, it should be one of your last options since the APRs are usually quite high, the time to pay is a little short, and the risk very high. Therefore, we recommend that you consider them a real option when you are certain that you will have the money before the expiration of the payment date.

Can You Build Credit With These Loans?

Obtaining a loan on the title of your car will have a negligible positive effect on your credit rating.

When you apply for an unsecured loan, the lenders, banks, agencies, and other facilitators of this service immediately fix your attention on the strength of your credit. Obviously, a bad rating will not recommend you, and if you have a decent score and pay on time, you will build your credit easily.

Why Does Not The Same Thing Happen With Auto Title Loans?

Because they are guaranteed loans, an asset or collateral gives the security to your lender that you are really committed to paying the debt. There is no credit check. A credit rating will not matter in this situation because if you do not pay, the lender keeps your car. It’s that easy.

We could say that you are borrowing money from your car, and if you do not pay, he will leave.

However, this is not the end of the story, although there is almost no positive impact on this type of loan on your credit. If your car is repossessed, the agency you resort to will normally inform the three big ones you have unfulfilled with the loan.

That means you will end up without a car and with a worse reputation than at the beginning. Now, it is true that there are many disadvantages and risks associated with this product, but there are certain benefits you can consider.

If your loan is divided into several installments, delaying the installments has almost no impact on your credit rating. As long as you manage to repay the debt, your credit will not be damaged in time.

Those who resort to this type of loan usually have credit ratings that prevent them from obtaining loans from banks, independent lenders, agencies, and others. So if that is your case, it will be useful to know where to turn to obtain this type of service.

How to Get Car Title Loans?

First, you must take a look at the requirements. For a loan like these to be approved, as a borrower, you must have:

  • A vehicle clearly and freely.
  • Submit a title without encumbrance to the lender.
  • Valid identification
  • Current vehicle registration.
  • Proof of insurance.
  • Proof of residence.
  • And also proof of income.

Some lenders also request vehicle keys, and others go further, implementing a GPS tracking device to be installed. Another determining factor is the age of your car. In general, lenders and agencies require that the car does not have more than 10 years of use or does not exceed a certain number of kilometers traveled. Each has its own parameters.

Keeping in mind that the approved amounts traditionally represent half the car’s value, your car must be in the best possible conditions. A neglected car, which does not receive minimum maintenance, is not a safe ally to obtain a car title loan.

Who Offers Car Title Loans?

There are several options online, but we can recommend these lenders, which have proven to be reliable and have decent fees and conditions.

  • TMG Loan Processing is a favorite among lenders seeking such services, making possible loans of up to $ 50,000.
    They usually allow their present car customers to exceed 10 years of use or 125,000 miles, thus expanding the range of potential customers.
  • Loan Center Title Loans: is a direct lender with more than 13 years in office. Potential borrowers must have a monthly income of around $ 1500 or submit a co-signer. They apply meager rates and fees compared to their competitors, but they work only in the states of Arizona, California, Georgia, Idaho, Missouri, New Mexico, South Carolina, and
  • Finova Financial: your repayment installments are usually extended for one year, and there are no penalties for early payment. They offer attractive rates, and fees ask borrowers to have their cars protected by insurance. They only offer their services in the states of Arizona, Florida, New Mexico, South Carolina, Tennessee, and
  • CarTitleLoans123: claim that they can provide their borrowers with loans over $ 25,000 and operate in more than 40 states. In addition, they are not extremely demanding with their requirements, you need to be working, and the car is in your name, and it can be from 2001 or more recent.
  • Champion Title Loans: allow you to apply for car title loans online or by phone as long as your car does not exceed 100000 miles. They take pride in ensuring that borrowers get approval and financing on the same day. They say they work in all states, except in New York, New Jersey, North Carolina, Pennsylvania, Ohio, and

Rates and Fees

The interest rates associated with auto title loans generally far exceed traditional bank loans, often 300 to 400 percent and sometimes up to 650 percent. Always remember that auto title loans are costly compared to other types of loans.

A $ 1000 title loan with an applied interest of 25% per month will represent $ 1250 for the borrower in only 30 days (without ignoring any other charges the lender charges, such as origination, for example). In addition, if you do not have the capacity to pay the loan, you run the risk of losing your car.

Do you have alternatives?

Mostly those who resort to this type of financial product think that they have no other option. In fact, it is possible that a person with a monthly income of $ 1000 cannot do more than $ 300 additional dollars on their own, so they can end losing their car. The following suggestions may help you expand the panorama:

  • Pay Day Loan: tell your boss what is the financial emergency that you face. Maybe you can agree to pay with work or subsidize it, which is using imagination.
  • Short-term bank loan: do not give your case for loss. Fill out an application with the bank or the agency of your preference for a loan secured with your car for a short term. The worst that can happen is that they reject the application, but the advantages deserve that you try.
  • Social services: you can get food coupons or free services, thus reducing your monthly expenses.
  • Negotiate: if you apply for the loan to pay other debts, first try to negotiate with your lenders, you may be able to get refinancing or some agreement.
  • Seek help: sometimes, the problem could be in the way money is administered. In all states, some free consultants will help you take measures to improve personal finances.

In The End

Resorting to this type of loan is not a failure. However, certain circumstances can leave you without alternatives, so you end up resorting to a car title loan. There is a great risk of running out of a car, but being a guaranteed loan, the possibility of approving for it is high, as long as you maintain reasonable care of your car.

Although the rates can be quite high, you can seriously consider this financial product when you fully trust that you can pay the debt within the refund term. However, it is clearly a final resource, which almost will not help you build your credit and, on the contrary, can harm you.