Can You Get A Title Loan On A Financed Vehicle?

Among the available options that might come to mind as soon as you decide to get a cash advance in a short time, is a title loan. But what do you do when your car is still financed? Can you get a title loan on a financed vehicle? The short answer is yes, but there is much more behind its creation. In this article, it will be explained in detail when title loans are being taken, and what if you are still paying for your car.

In this article we will explain what title loans are, their main advantages and disadvantages, and whether it is worth taking such an option at all. So sit fast, no pun intended, and let’s drive into the details of securing a title loan over a financed motor vehicle.

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What is a Title Loan?

A title loan is a secured type of loan in which the borrower uses the car as security on the credit. In other words, you give your car title to the lender in return for cash you need to buy something else. Title loans are usually short-term and attract high interest and fees making it a rather dangerous product. But for those who are in urgent need of money and have no other way to get it, title loans are very alluring.

The primary draw at title loans is that most of these types of funds do not request credit checks. The status of your credit score does not matter most of the time to the lender but what does matter is the value of the car. The disadvantage of car title loans is that if after receiving the cash you are not able to pay up the money, the creditor has every legal right to seize your car and sell it in order to recover your money.

How Title Loans Work

Title loans belong to secured loans since they are offered based on your car and its title. The procedure is quite simple. Unlike the title of your car, you offer the title of your car to the lender, and they allow you to access cash. A cash sum depends on your car valuation; however, you can keep on using your car as you repay the loan amount to the company.

In case you are unable to repay the loan the lender can legally repossess your car, sell it, and use the proceeds to clear the balance. However, the lender is placing a bet with you with an offer to give you cash; the only hedge that the lender takes is to retain your vehicle’s title.

What Does it Mean When a Vehicle is Financed?

What Does it Mean When a Vehicle is Financed? A financed vehicle is a car that still you are paying for it. In other words, you do not have a clear and complete title to the car before you pay the auto loan off. The common form is the secured car finance where the lender – typically a bank or a credit union – has a lien on the car, making it legal to confiscate the car until the debt is cleared out.

When a vehicle is financed, this means that when the title is signed only a small portion of it is signed in your name. Obviously, the lienholder’s name is also on the title – which makes things a little tricky if the car is to be used as security for another loan, such as a title loan.

The Process of Applying for a Title Loan on a Financed Vehicle

• Ensure you get a lender that accepts financed vehicles.
• Enter your vehicle details so that we can evaluate its worth.
• Include the required paperwork such as your loan information, documents of proof of income, and finally the title to your car.
• The current lienholder can be talked to so as to allow a second lien in the vehicle.

How Lenders Determine Loan Amount

Actually the loan limit is determined by the loan-to-value ratio or LTV in short. The first ratio is obtained by dividing the amount you need to borrow by your car value. If you still have a balance on the car you are using, the lender will look at how much of an equity you have, which simply means the value of the car is less than the balance.

Can You Get A Title Loan On A Financed Vehicle

Benefits of Getting a Title Loan on a Financed Vehicle

• Quick Access to Cash:

The first and one of the major benefits that come with title loans on financed vehicles is that you can get money quickly. If you require the money in a hurry, a title loan can be completed in less than a day, which makes the process involving the borrowing of funds a fast one.

• Continue Using Your Vehicle:

A title loan is different from other lines of credit where you will have to sell the car or pledge other assets or properties that you can sell to get the cash. This is particularly important to individuals who use their vehicle for personal needs, for example, going to work, or for running other essential chores.

• No Credit Check Required:

This is because your car acts as security for the loan and any title lender will not undertake a credit check. This makes it ideal for persons with bad credit or those who do not wish to have a hard inquiry made on them. In this case, car value becomes the most important element to be considered, not your credit score when considering the amount of loan to offer you.

• Use of Vehicle Equity:

You can use the car even if the balance portion hasn’t been fully paid off for accessing equity for a loan. Lenders will assess the value of the car and deduct on it what you still owe and the amount obtainable by using the car equity. This option assists you in using the value of your vehicle to get the cash you need as soon as possible.

Risks of Getting a Title Loan on a Financed Vehicle

Repo is one of the biggest risks that one faces when one takes a title loan on a financed car. In the case of default, the creditor can take the car away from you while you are still clearing the initial loan balance. Consequently, you are likely to lose the car and the equity you have invested in it. Further, title loans charge huge amounts of interest that take people into an exploitative cycle and fail to provide them the required amount at the time of repayment.

Alternatives to Title Loans

• Personal Loans: Credit personal loans give lower interest charges and longer reimbursement term periods or time frames.
• Credit Card Cash Advances: It can also be quicker, and, depending on the circumstances, may not come with as many drawbacks as you might think.
• Borrowing from Friends or Family: This option does not attract interest and all or part of the seed money can be reimbursed at user convenient times.

How to Avoid Falling into a Debt Trap

However, to avoid being caught in this type of trap, try to put your expenses in a safer financial plan, detailing the income part. This will assist you in knowing the amount, which can be borrowed as well as repaid comfortably. It is wiser to take a smaller amount than what is most allowed because higher balances will definitely attract high interest rates.

Lack of timely payment should be avoided to evade the incidence of high-interest charges. Also, research for subsidies that allow one to come up with a lower interest rate and better loaning status. You should be familiar with the provisions of any of the loans before you agree with the provider to avoid misunderstandings in the future.

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Important Considerations Before Getting a Title Loan

Every car owner should think about all the pros and cons before going for a title loan as well as considering their solvency to meet the terms of the credit. Know your car’s equity to know how much credit you can avail without having your car repossessed.

Compare different companies to learn which title loans offer the best interest rates and conditions because not all of them are equal. Furthermore, close the lines and read the small prints to see if there are charges for any amount that is paid later than agreed. Last of all, we should ask ourselves whether the financing strategy proposed has other options that are safer and easier for the long term.

Conclusion

All in all, though title loans are acceptable whenever you need a quick loan secured on a financed car, they entail numerous threats that should be suggested. Before moving any step further, it is crucial to know the terms, evaluate your ability to repay, and weigh down other options.

When considering a title loan it is always advisable to go to a reputable company and ensure you can put a plan in place in a situation whereby you cannot repay the loan. In conclusion, most of the time knowledge is power, and being alert can assist you steer clear of problems and make the greatest monetary decision possible for your circumstances.