A car title loan is one of the fastest ways to obtain cash in Texas.

Simply called a “title loan,” this short-term loan option lets you borrow money in which you put up your car title as collateral. If you need quick cash to cover an emergency or major financial commitment, this route is worth considering.

What are the Features and Benefits?

In Texas, there are many types of title loans to choose from, with varying finance charges and types of interest depending on your situation and needs.  The main advantage of this loan is the ease of obtaining it. Lenders will have manageable requirements and terms, such as no credit checks and minimal paperwork, and some could even make instant approvals.

With just a car title and few supporting documents, you can walk away with money in your wallet and still get to drive and own your car.

There is a catch, however, as with all secured short-term loans. If you miss a payment, make a late payment, or not pay at all, the lender will take hold of your car. So if you’re considering this option, make sure that you are financially capable of meeting your monthly interest and principal payments.

How Do Car Title Loans Work?

There are three things to know about the structure of a title loan:

  1. Loan amount
  2. Term length
  3. Interest rate and finance charges

Loan amounts can be as low as $100 and go as high as $5,000 or more. The length of the loan will depend on the amount you borrowed and the payment amount.

For the interest and fees, the lower they are, the better. But you should also consider its calculation against your principal loan amount. Is it simple interest or compounded? How frequently is it compounded?

With some lenders, you also have the option to customize a payment plan based on your current and future financial situation. If the lender doesn’t provide this option, it’s best to look elsewhere.

Once you’ve decided on an ideal loan agreement and provided all the documents, you’ll hand over your car title, and the lender will put a lien on it and give you the borrowed amount in cash.

Keep in mind that you can only redeem your auto title once you pay the loan amount in full.  During this time, you may opt to walk away with your title or renew the loan if you need the money.

Managing Your Car Title Loan

When it comes to managing your car title loan, the golden rules are to plan, compare as many rates and lenders as you can, and study the loan terms carefully. This way, you can avoid doling out more cash to redeem your auto title, or worse, losing your car.

While state and federal regulations are there to protect you from these harsh consequences, it pays to make wise choices and be proactive about paying off the loan as stated in the agreement.

A title loan promises fast and easy cash. To some, the finance charges and extra fees can lead to a cycle of debt. But if you know to manage your money well, it can be a lifeline during an unforeseen life event, like a medical emergency.

Nonetheless, loans of any kind always come with risks and repercussions. So, base your decision to take out a title loan on how badly you need the money. If it’s just for a vacation, try to save instead, and start finding ways to build an emergency fund so you don’t need to borrow huge sums.

To learn more about all of your title loan options, please give us a call or visit one of our branches and let a VIP Finance staff member walk you through our process.