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5 Considerations When Taking a Title Loan


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There comes a time in many people’s lives when unexpected expenses and financial emergencies arise. With the recession and inflation creating additional challenges in the post-pandemic world, finding short-term solutions is a must for many struggling consumers.

Title loans are an option for people who need access to funds quickly and with limited alternatives. Here are five considerations when taking a title loan.

What You’ll Use as Collateral

While title loans are typically associated with cars and trucks, they can also be applied to other vehicles. You can get everything from classic car title loans to boat title loans. Determining which vehicle to put up for the loan will impact how much money you’re approved for and the implications if you default.

For example, repossessing your primary transportation method for getting to work could worsen your financial situation. While losing a boat or RV would be awful, it wouldn’t impact your employment.

Being a responsible borrower is essential: only take a loan if you think you can pay it back. However, taking a logical approach can protect you from further financial distress.

Repayment Terms and Ability

Read the repayment terms closely before signing. Take the time to understand the interest rate and repayment schedule. While the lender will look at your proof of income to determine how much you can borrow, it’s still crucial to crunch your own numbers and ensure you can repay the loan.

Early Repayment Fees and Penalties

Some lenders charge penalties and fees for early repayments. This charge is to offset the lost interest from you paying back the loan ahead of the terms. While this approach seems unfair, it’s typical with many types of loans — mortgages from traditional banks often have substantial early repayment fees.

If there’s a chance to pay your loan back early, clarify the potential penalties around this. Depending on the situation, it may be more affordable to pay the penalty and end the loan. Some lenders don’t add this caveat. Again, reading the fine print is a must when taking a title loan (or loan of any kind).

Worst-case Scenario Options

To be a responsible borrower, you should hope for the best but plan for the worst. Consider what you’ll do if something happens to impact your ability to repay your loan on time. What other options are available to make a payment if another unexpected expense arises? Can you borrow the money from a friend or family member?

Some lenders have a rollover plan that allows you to extend the loan for a fee. In no scenario should you default on a payment without discussing the issue with the lender. Be proactive and call ahead of the due date to make other arrangements.

Creating an Emergency Fund for the Future

Finally, consider how you’ll set yourself up to avoid this situation in the future. Financial emergencies can happen to anyone. While short-term loans help get you out of a sticky spot, they’re not a long-term solution.

Set aside money every paycheck to build an emergency savings fund. Your future self will thank you.

DisclaimerMoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.



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