A car title loan is a secured loan and as such it requires that the borrower provides collateral. In the case of a car title loan, your car is the collateral used in securing the loan.
However, using your car as collateral to secure the loan does not mean that you will leave your car with your lender.
What you leave with your lender is the title of your car, this allows you to still have access to your car. Your lender places a lien on your car title for the entire duration of the loan or until you have paid off the loan in full.
What is a Car Title Loan with a Lien?
The lien on your title when you secure a car title loan is for the lender to manage involved in lending you the money.
On your title loan, the lien is for your lender to assume ownership of the car until you have completely paid off the loan. The lien placed on the car title serves as the collateral to ensure the borrower repays the loan.
A car title loan with a lien is a type of secured loan that requires the borrower to use their car to secure the loan.
Secured and Unsecured Loans
A secured loan requires collateral while an unsecured loan does not require collateral. A car title loan is a type of secured loan that most times does not require the lender to focus on your credit score in giving you the loan. Your car is your credit and collateral for this type of loan.
For an unsecured loan, the lender focuses on the borrower’s credit score and financial standings before they can give out a loan.
For applicants who do not have a good credit history, they might not be approved for an unsecured loan.
An unsecured loan is not meant for people with bad credit or those who lack a credit history or have a low credit score.
Advantages of a Car Title Loan
A car title loan offers several advantages that include;
- It is a quick and fast means of securing loans in emergencies.
- You can still drive your car around when you secure a car title loan.
- The loan terms can negotiate to suit your unique financial situation.
- You can get flexible and convenient repayment plans.
- It does not require credit checks that may elongate the process of acquiring this type of loan.
Do not hesitate to consider taking out a car title loan when you have an emergency before you. As long as you own a car free and clear, you can qualify for this type of loan.
The title must carry your name. in addition to your car title, you would need the following documents to secure a car title loan;
- Proof of income.
- A government-issued photo ID.
- Proof of car insurance.
- Proof of residence.
- References.
With these additional documents, you can easily qualify for a car title loan.
