A lot of people are still not very familiar with the different kinds of loans that they can get, as well as what might be in it for them if they take out that specific loan. In this article, we will be tackling title loans and some commonly asked questions regarding title loans.
What is a title loan?
Title loans are loans that require an asset as a form of collateral. If the borrower fails to pay the loan, the lender can take possession of the collateral as a way to recover the unpaid loan.
Title loans usually have shorter repayment periods as the amount available to loan also depends on the value of the asset being used for collateral. For smaller amounts, most title loans usually have a repayment period of a month, but other title loans offer a repayment period for as long as two years, but with interest.
Certain kinds of loans will allow you to use your car as collateral for a loan. Car title loans are a type of short term loan that allows lending companies to place a lien on your car title until the loan has been paid off.
You don’t even need to be in good credit standing to apply for a car title loan. The reason why car title loans and other similar title loans exist is so that people with less than stellar credit scores can still take out a loan they might need to use to finance something important. As long as you have a car title and if you can prove that you can pay off the loan in the agreed time, you will be approved for a car title loan.
Can I use my house to take out a loan?
Yes, you can use your house as collateral for a loan. Or rather, you can use the value of your home less the mortgages you owe on it. This is what is called a home equity loan.
Home equity loans are especially useful if you want to make some home improvements to increase the value of your home, but home equity loans can be used for a number of things really.
Repayment terms for home equity loans can vary depending on what route you choose. Most lenders will typically advise you to get a home equity line of credit (HELOC) because of the amount of control you have over the loan balance and the amount of interest you pay.
Can my credit rating increase with a title loan?
Title loans are popular for a few reasons, but the fact that it does not take your credit rating into consideration is what makes people seek out title loans. The risk of losing your asset can be high in certain cases, but it makes up for it by giving you financial aid despite bad credit ratings.
Because it does not take your credit score into consideration, title loans have very little effect on your credit rating. If you default on a title loan, you will not have to worry about your credit score dipping even further. In that same vein, if you make good time on your loan repayments, it also has little to no effect on improving your credit rating. If you need to find ways to improve credit rating, it might be best to talk to a financial advisor.