title loans
11 August 2023

Instant injection of cash is not feasible when your credit history is not so good and you need a large sum of money. Direct lenders will run an affordability check before signing off, and not to mention, they will charge higher interest rates if your credit score is less-than-perfect. 

Although most lenders are flexible with loaning to fund unforeseen expenses despite a poor credit score, it is not easy. The majority of times, you will get a paltry sum that would not be sufficient for you, but you can secure a larger sum by applying for title loans. 

Title loans are also small loans, but the title of your motorcycle or car secures them. These loans can prove too costly if you fail to pay the debt on time. 

Features of title loans

Here are the features of the title loans:

  • The loan amount will be between €100 and €10,000, which amounts to at least 25% or up to 50% of the value of your car. 
  • Lenders will not run hard inquiries. You must have an income source to pay off your debt, although submitting proof of your income is unnecessary. Your car must be free from any outstanding car loan. You will need a clear title, proof of insurance and a photo ID to apply for these loans.
  • Lenders may put a condition where you have to pay off the debt over a period of 30 days. If the amount is large, the payments will be made in instalments within a few months. The lender will retain the car’s title, but you are free to drive the car.
  • Failing to pay off the debt gives the right to your lender to take back your car to liquidate it to get their money. If the car is sold at a higher price than the unpaid loan amount, your lender will retain that money. 

How to take out a title loan

Here is how you can apply for a title loan:

  • Fill in all particulars asked in the application form and submit the scanned copy of relevant documents. 
  • Wait until the lender reviews your application and gets back to you. A lender may call you to ask for more details about your car. Even they would come to see your car. 
  • If approved, you will electronically sign the agreement that transfers the title of your car to your lender until you clear all dues. 
  • You will get money in your account and start making payments as per the contract. 

How much does the title loan cost?

Title loans are secured loans as they are not as expensive as personal loans. The interest rates of these loans will be around 20 to 25%, while the APR will be up to 300%. 

Supposing that you took out a title loan worth €1,000 at an APR of 300% for one month, you will pay back €1,250. 

Although these loans are not as expensive as unsecured ones, they can be when you fail to repay the debt. This will lead to the repossession of your vehicle and an endless debt spiral. 

What are the drawbacks of title loans?

Here are the drawbacks of title loans:

·         These loans are extortionate

These loans could be very expensive as they are involved with a lot of fees. Because these loans do not have a longer repayment term, it can be challenging to clear them on time. If you repay the debt in instalments, monthly fees will be added, so they can be even more expensive. 

·         You can easily mount up your debt

Many borrowers end up racking up a lot of debt because they find it challenging to pay off the due on time. Consequently, they ‘roll over’ the loan. The fees and interest keep accruing, which makes your loan more expensive. After a certain period, your account will become default, and then your lender will repossess your car to recover their money. You will lose your car and also your credit score. 

·         You can be prey to scams

Scammers might trap you. Some spurious elements can offer you exciting deals in the disguise of reputed direct lenders. They may charge outrageously higher hidden fees, which will make it more expensive. 

·         Lenders can track you

Some lenders may want to put a tracking device in your car so they know the exact location of your car when you make a default, so they can take it back without any hassle. In fact, some lenders would install a Kill Switch that stops you from starting your car in case of a default. 

What are the alternatives to title loans?

Title loans are undoubtedly expensive when considering the risk of losing your vehicle. Therefore, you should try to consider other alternatives:

·         Online small loans

The online loans in Dublin will come in handy if title loans seem to be very risky. These are unsecured loans, in other words, personal loans. You do not have to bear the risk of losing your collateral. These small loans can be slightly expensive, yet you can get a deal at the most attractive interest rates when your credit score is stellar. 

·         Credit cards

Use a credit card if you do not have to borrow a larger sum. You can stay away from paying interest by eliminating the balance in full when the bill is generated. Do not keep the balance, as it will attract interest on a per-day basis. 

·         Cash advance

Credit card cash advances are more expensive than credit card bills as they do not provide a grace period, but they are still cheaper than title loans. There is no possibility of losing anything. 

The final word

Title loans can provide you with immediate cash when you are unable to get approval due to your poor credit score, but they are actually very expensive loans. The APR will not be very high, but a shorter repayment length can make it challenging to deal with these loans

In order to avoid harm to your credit score, secured vehicle and finances, you should try to consider the alternatives like online small loans, credit cards, and cash advances. You can even consider borrowing from your family.

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