Car title loans provide can help you get quick access to cash when you’re in a bind. It’s important to understand how the car title loan process works and how laws and regulations differ from state to state. Some states ban car title loans but may allow you to obtain an auto pawn loan. Keep reading to understand the differences between the two and what you should be looking out for.
What Is A Car Title Loan?
A car title loan provides you with cash in return for a lender or institution gaining temporary control over the title of your vehicle. It’s returned to you once you’ve made full repayment of the loan plus any interest and fees charged to you.
Most lenders ask for the following when evaluating you for a car title loan:
- A valid driver’s license
- Full ownership of your car title
- Proof of regular income
- Proof of residency
Can I Get A Car Title Loan From My Bank?
Some banks and credit unions offer members the opportunity to obtain a title loan directly through them by filling out an application. An underwriter will assess the actual value of your car and come up with an amount they feel comfortable about extending to you. The terms compare favorably to rates normally offered for a regular car loan.
What If I Don’t Wish To Use A Bank Or Credit Union?
Private lenders exist to fill this need in some states if your financial institution doesn’t provide this benefit or you wish to look for outside options. Make sure you understand all the terms and conditions for any contract you sign with this type of lender. Most have very specific terms about the interest rate charged, fees you’re responsible for, and the amount of time you have to pay off your loan.
What If My State Doesn’t Allow Car Title Loans?
Here’s a list of states where car title loans are illegal under any circumstances:
- Colorado
- Connecticut
- Hawaii
- Montana
- Nebraska
- New Jersey
- New York
- Rhode Island
- South Dakota
- Washington DC
- Wyoming
Auto Pawn Loans
You may be able to obtain an auto pawn loan through a private dealer if you live in a state banning car title loans. Most prerequisites are the same, but many require you to leave the vehicle with them instead of just the title. They return your vehicle once they receive full payment of the loan.
Read the conditions of any contract you sign. Make sure you know what your payments will be and what will happen if you default on the terms of your contract. That goes a long way towards helping you make the right financial decision for yourself.
