You may have heard of a title loan before, but may not be sure exactly what it is. However, if you own a car, it is important to understand what this type of loan is all about, so you can take advantage of using one when you need quick cash
Why it is called a title loan
The word title simply refers to the title or pink slip to your car. In essence, you are putting up your car as collateral for the loan. However, since you get to retain possession of the car, you only leave the title with the lender. This is what makes title loans so popular. You can get the cash you need quickly, without having to lock up any assets as security for the loan. Since many people have a car that is paid for, they have an asset that can be used for a secured loan.
You may be able get a loan without a title
If you don’t have the title to your car because you are still making payments, it is still possible to get a title loan. You only need to have a sufficient amount of equity in your car. Equity is the amount that your car is worth beyond the balance of your car loan. Some lenders will pay off your car loan, and then loan you the money you need, keeping the title to your car until you pay off your title loan. This loan will now be a combined amount that is your previous car loan with a cash amount given to you by the title lender. Each lender has different policies regarding the amount of equity required, so you will need to inquire about the details.
The advantages of a title loan
As indicated above, after you get the loan money, you can still drive your car around, but this is only one advantage. For quick cash, the interest rates are usually lower than you will find using a payday loan because title loans are secured. In fact, a payday loan is a misnomer. It is simply an advance on your next paycheck. A title loan is more than that. It can be, and usually is, financed over the course of several months and paid back in monthly installments.
To get more information about title loans in houston tx, you can contact a local title lender in your area.