A car title loan is a quick way to get cash to cover unexpected emergencies or other personal expenses.

How Does a Car Title Loan Work?

Your car serves as the collateral for the loan, but since the loan is actually against the car’s title, you keep the vehicle and continue to drive it without any restrictions while you’re repaying the debt.

Unlike a personal loan from a bank, a car title loan is based on the value of your car and not your credit score or history. If you have credit problems or no established credit, you might still qualify for a car title loan if you have owned a vehicle that is fully or partially paid off.

Some car title lenders will pay off the balance on your auto loan. If your auto loan interest rate is higher than the title loan interest rate you’re offered, you’ll save money by using the title loan to pay off the auto loan balance. Compare your auto loan rate to the title loan rate to determine whether having the title loan lender pay your auto loan balance is the better option for you.

Before you take out a title loan, review the loan agreement terms. Some car title loans have short repayment terms, such as 30 or 60 days. If you can’t pay back a short-term title loan in full at the end of the loan, you might have to take out a new loan with a higher interest rate to avoid losing your car. VIP Finance offers loans with one to two-year repayment terms, so you have enough time to pay the loan off without going into a new loan with higher interest.

A title loan might have an interest-only monthly repayment schedule, with the entire principal due at the end of the loan term.

Interest-only repayments may make it difficult for you to pay back the loan in full and on time.

Why VIP Finance of Texas?

The VIP Finance loan repayment schedule includes both principal and interest, so you won’t have to come up with a lump sum payment at the end of the loan term.

Consider the annual percentage rate of any title loan you’re considering. The APR represents the annual cost of the loan to you in terms of interest and fees. Some title loan companies have APRs as high as 250 percent, according to Christopher Neiger of CNN Living. VIP Finance, by contrast, offers an APR of just 6 percent. Depending on your loan amount, a lower APR can save you thousands of dollars in interest and fees.

Review the title lender’s policies on missed and late payments before signing the loan paperwork.

A title lender may have the right to take your car after one missed payment, depending on the offered loan terms.