Title Loan Naysayers: Are They Being Completely Honest?

Loan lender talking to clients

Title loan lenders have their fair share of detractors. After all, these lending institutions are only allowed to operate in 20 states, and critics fear that title loans can ruin the lives of cash-strapped individuals. To their defense, lenders have a valid justification for charging high interest. They primarily serve the needs of people who have little to no access to traditional cash advances. Without Illinois, Texas, New Mexico, and Utah title loans, financially stressed individuals might have nowhere to go.

While naysayers have logical arguments for opposing title loans, those against such secured, short-term financial products aren’t always completely honest. For starters, many of them hardly mention that:

You Can Address Several Financial Problems at Once

If you take out a title loan, you may qualify to borrow up to 50% of your car’s wholesale value. If your vehicle is practically new with no major body damage, you can get more money from it than you can from conventional cash advances.

In many cases, you can receive more than you need. If you’re in monetary distress, you can use the instant money to cover your emergency needs and pay off other debts. When all is said and done, you can come out in a better financial shape provided that you settle your title loan balance on time.

You Can Get a Relatively Lower Interest Rate

Compared to payday loans, title loans usually come with lower interest rates. The security, which is your car’s title, will decrease the risk your lender has to absorb by providing you with the cash you need.

But then again, do the math to understand how much exactly the overall cost of borrowing will be. Rather than checking the interest rate alone, calculate the annual percentage rate (APR). The APR is the figure that represents all of the fees you need to pay to borrow money for 12 months.

You Don’t Need to Surrender Your Car

A lender won’t require you to turn over your keys after processing your title loan. You only need to give the title as an earnest promise to pay. You can continue driving your vehicle, and it won’t be repossessed for as long as you repay what you owe before the term is up. If you need more time to pay everything off, you can roll over the loan for another month in exchange for a fee.

You Can Use Other Vehicles

Man applying for a loan

Title loans are not vehicle-restrictive. Apart from cars, many lenders also accept all-terrain vehicles, trucks, motorcycles, and snowmobiles. If you can use other vehicles as collateral, you can keep your primary means of transportation to borrow a significant amount of cash.

You’re Not Likely to Lose Your Collateral

Out of the 1.7 million people that get a title loan each year, only less than 18% end up having their vehicle repossessed. The majority of borrowers eventually finish their loan and recover their security. An 80% chance of not losing your collateral is large enough to feel confident about your title loan application.

Title loan lenders are not going to lie to you and say that they charge lower interest rates than traditional banks. These lending institutions turn a profit through repeat business, which is why it’s hard to believe that they’ll rip potentially regular customers off.