Title loans have a bad reputation for a lot of people. The loans are considered by many to be predatory and take advantage of people in desperate situations. But, of course, the truth is more nuanced than that, and every loan comes with potential problems. Still, it’s vital to know the truth about any loan before committing.
Title Loans in Gastonia NC area: Misconceptions
Collateral
One misconception is that when someone obtains a title loan, they use their car as collateral. That’s not the whole truth. It’s the car’s title that’s used. If people can’t pay the loan, the car is transferred to the loan office to cover the lost income from lack of payment, similar to pawning an item at a pawnshop. Therefore, only people who own their car outright can obtain a title loan.
Credit Record
Does bad credit make it hard to get a title loan? Since title loans use physical collateral as part of the process, they are less concerned about such issues. This reason is part of why some people think they’re predatory, but it’s more a matter of practicality.
Interest Rates
The APR on title loans tends to be higher than that of other more traditional loans, partially because the loan period is usually shorter than most loans – weeks instead of years. However, people seeking options regarding early repayment have a good chance at favorable terms because there are a lot of title loan offices in the market.
Missed Payments
Another widespread misconception is that even a single missed payment will result in the loss of the car. Title loan offices can’t be that aggressive simply because they are well aware of their reputation. If a payment is missed, they will be willing to work with the borrower like any other lender. The usual procedure includes extending or reworking the loan, which may not be ideal but is better than someone losing their car.
While title loans have a reputation, some are based on people’s misconceptions about title loans and how they work. Understanding the truth is vital when seeking out a loan. Yes, the car’s title is on the line, and interest and fees can be higher and need to be paid faster than with traditional loans. However, title loans are also a lot faster and easier to obtain than more conventional loans, so, for people in need, they can make a difference during an economic crisis.