Alternative lending options may not be the best for long-term solutions, yet instant auto title loans and payday loans continue to attract new and old customers every day. They provide instant gratification for financial emergencies. The attraction is the surface value; fast money with little qualification expectations.
* A customer must own the title outright without liens.
* Monthly income (bring a recent pay stub)
* Valid photo identification (driver’s license or government ID)
* Proof of residency (bring a recent utility bill)
* Bring your vehicle in for a blue book value inspection.
How do these qualifications differ than in-store payday loan ones? You won’t be showing your car to anyone or have the need to bring in your title; but you will have to show your most recent bank statement as well as have a blank check.
What will you discover? You will find a quick money source for people who have poor or no credit. These people are known to the financial world as sub-prime applicants, those will low credit scores. Short-term loans are an option for the employed who might have made financial mistakes in the past which continues to haunt them. The dreaded credit score lingers on a person’s financial status till each negative is removed. Seven years of reduced money options availability for high risk customers. If a bank or creditor does accept one of these applications, the interest rates tend to be much than prime applicants. Payday loans and auto title loans are fast money options for those who get turned away. Yes, the interest is higher than other options, but when used according to the loan terms, there will be no interest applied. Pay the fee for using the loan, return the money on the original due date, and you are on your way to improving your finances.
This is where, the tough stuff happens. These companies are banking on repayment. When a borrower fails to pay the money back as promised, the company starts adding on interest for each term money is left unpaid. This is why paying down on your loan is a crucial piece to repaying the loan. Anytime you default on a loan, there is nothing but bad news. An auto title loan company will attempt to collect on the money, but if these attempts continue to fail, the vehicle will be collected. Having signed over the title as collateral, a default loan will leave you without a car.
A payday loan is not a secured loan. There is nothing to take if the money is not repaid. What will happen is that the loan will be sold off to a collections agency and the debt will be reported to the credit bureau. Another seven year negative mark keeping your credit score low.