A title loan is a loan that requires collateral, usually a car or property title. There are two reasons that make the loan a popular option today in Utah: 1) the borrower’s credit rating is not an issue, and 2) approval is quick for an amount that may range from $100 to $1000.
Title Loan Basics
A car title loan is the most prevalent form of title loans. To avail of the loan, a borrower only needs to have outright ownership to a vehicle and sign over the title to a title loans lender in Utah. You can borrow as much as 25% of the car’s value. The car title then becomes the collateral.
Loan proceeds are typically $1000, but can go higher. Terms may range from one payment after a month or via installments over a period of one or two years.
If the borrower fails to pay the loan within the agreed terms, the lender may repossess the car immediately or allow the borrower to pay penalties and interest for late payment.
Title Loan Cost
Title loans are particularly attractive to people with poor or no credit who may be in immediate need of cash. Relatively high costs, however, come with the convenience. The APR, for example, on a typical car title loan may run up to 300%. Some borrowers may find it difficult to catch up and pay the principal.
To illustrate, a $500 loan with a one-month term and 300% APR means that the borrower must shell out $625 to fully pay the loan, including interest. For people who need $500 for an emergency, the extra $125 may cause a bigger financial burden.
A title loan is a quick and convenient way to pay for emergency needs. While it has some advantages over other loan products, it is important to consider your capacity to pay before availing of one. After all, you may lose your car if you default on your payments.