How it Works Complete step by step

> How it Works Complete step by step

How A Car Title Loan Works

Welcome new car title loan customer! First time? This page will guide you through pretty much all you need to know about title loans. The good, the bad and the ugly.

Getting a car title loan is a lot easier than people think. It’s just that not a lot of people think about getting one because they do not know how it works. We hope to clear that up for you so that you can make a wise decision on your loan.

Have you ever pawned an item?

If so you know that you would bring in your item, say a watch, to the pawn shop and the dealer would figure out how much the watch is worth. Then they would figure out how much they could loan you. The amount is never the true value of the item because they have to consider that you may not pay off the loan and they may end up putting it on their shelves to sell to offset their loss.

Car title loans are just like a version of this but the difference is you don’t give them the car to hold. You do not give them the car with these loans. You still drive it and have it in your control. Title loans go under different names and there are different programs because of this.  Additionally, some companies will let you leave the vehicle during the loan and that is why auto pawn is the “sister” loan to auto title loans.

So where do you begin?

First thing you need to know is if your State allows you to get a title loan. Some don’t. Here is an updated list for 2017:

STSTATEIs it possible by law?
ALALABAMAYes
AKALASKAMaybe – Tribal lenders
AZARIZONAYes
ARARKANSASYes
CACALIFORNIAYes
COCOLORADONot allowed by State law
CTCONNECTICUTNot allowed by State law
DEDELAWAREYes
FLFLORIDAIt’s not considered a title loan. Just a loan but yes
GAGEORGIAYes
HIHAWAIINot allowed by State law
IAIOWAMultiple types of loans available.
IDIDAHOYes
ILILLINOISYes
ININDIANAMultiple types of loans available.
KSKANSASHave to be a small business owner
KYKENTUCKYMaybe – Tribal lenders
LALOUISIANAIt’s not considered a title loan. Just a loan but yes
MDMARYLANDMaybe – Tribal lenders
MEMAINEHave to be a small business owner
MAMASSACHUSETTSYes
MIMICHIGANIt’s not considered a title loan. Just a loan but yes
MNMINNESOTAIt’s not considered a title loan. Just a loan but yes
MSMISSISSIPPIIt’s not considered a title loan. Just a loan but yes
MOMISSOURIYes
MTMONTANANot allowed by State law
NENEBRASKANot allowed by State law
NVNEVADAYes
NHNEW HAMPSHIREYes
NJNEW JERSEYNot allowed by State law
NMNEW MEXICOYes
NYNEW YORKNot allowed by State law
NCNORTH CAROLINAMultiple types of loans available.
NDNORTH DAKOTAMultiple types of loans available.
OHOHIOMultiple types of loans available.
OKOKLAHOMAMultiple types of loans available.
OROREGONNot allowed by State law
PAPENNSYLVANIAMultiple types of loans available.
RIRHODE ISLANDNot allowed by State law
SCSOUTH CAROLINAYes
SDSOUTH DAKOTANot allowed by State law
TNTENNESSEEYes
TXTEXASYes
UTUTAHYes
VTVERMONTMaybe – Tribal lenders
VAVIRGINIAYes
WAWASHINGTONHave to be a small business owner
DCWASH DCNot allowed by State law
WVWEST VIRGINIAYes
WIWISCONSINYes
WYWYOMINGNot allowed by State law

 

Second step… you fill out the on-line form on our site. This will tell us two things. One, who you are and how to contact you and two, information about the vehicle. We then use a couple programs to figure out the value. Kelly Blue Book and sometimes Black book. These will tell the wholesale value of the vehicle.

Next, we go to our lenders and see which one has the best program. We determine the best program based on the amount they will loan you, the loan interest rate and the duration and term of the loan and your ability to make the payments. We then inform you and the lender of your inquiry and stay in contact with you until you have either told us that you no longer need the loan or that you have been given the loan and are happy with the result.

When you get ready to get your money you MAY need following:

  • Govt. issued photo ID
  • Free and Clean Title
  • Three references not related to you
  • Insurance (some states require this but not all)
  • Social Security Card (or a Document on which your name and SSN both are listed)
  • Pictures of your car (all 4 sides including VIN and Odometer).

We can help you with the above if you don’t have what they need. We may be able to get exceptions you do not because of our experience.

The lender will ask you to sign a loan agreement with them. They will also verify the condition of your vehicle and odometer. They will also be placed as a lien holder on the title until the vehicle title loan is paid off.

When the underwriter contacts you, they will quote you a number which is the maximum amount they can loan you. You do not have to take that full amount but you can if you desire. You will also be quoted an interest rate. Note that this rate is a monthly rate, not yearly, based on the amount of the loan. You will make monthly payments based on the duration you request, the interest rate amount and the principal.

In all cases our company believes that you should not take out more money than you need and you should know that car title loans are expensive and you may have other options than taking out this loan. You should consider ALL your options before taking out a title loan. Never take out more than you need and never take out a loan if you cannot afford the payments comfortably within your income.

Car Title Loans STEP-BY-STEP RESOURCES GUIDE

Here is a step by step process to take you from beginning to end on your car title loan journey:


CONTACT: click below….

Our contact info


WHICH COMPANY SHOULD YOU CHOOSE:

Naturally we are going to say us because without you, we are nothing and we need and want your business. If we can’t get you funded then we make no money so please use us to help you. It’s free.

If you don’t want to use us, here is a link to a wonderful website that does a great job with listing CarTitleLenders


SUPPORTING DOCUMENTS YOU MAY NEED BASED BY LENDER:


UNDERSTANDING THE INTEREST RATES: click below…

APR (annual percentage rates). This is the interest rate based on an annual total. Simple to do this.. Take an amount and multiply it by this number and you will know the interest you will be paying over the course of the year.

EXAMPLE: If you had a 29% interest rate and you borrowed $5000, then your yearly interest would be $1450 ($5000 x 29%).

MPR (monthly percentage rates).  Car Title Loan companies have HIGH interest rates. They can go from 29% (lowest we have seen) to 200-300%. Average is about 87% to 97% APR. Because of this, when this is told to the consumer it looks freaky high so instead, most title loan companies break that number down to a MPR. It sounds better to say the monthly interest rate is 8% then it is to say the yearly interest rate is 96%.

So we can understand this interest rate better as it applies to a loan, we must look at how the MPR is applied. Not all months have the same amount of days in it. One has 28 days while others 31 days. If a rate is MONTHLY, then you would need to do this math:

Let’s say you have a $5000 loan at 8% MPR. Also the month we will use is February which has 28 days.

8% divided by 28 days means the DAILY interest THAT MONTH is .28

If you had a loan balance of $5000 then each day in INTEREST is for February is $13-14 a day.  In a year, that would equal $4745 in interest.

Let’s say you had the loan out for 2 weeks. That would be $189 to borrow $5000 and that’s not so bad at all for getting money with bad credit, and sometimes in hours.

Let’s say you didn’t repay that loan for 2 years! That would be $9490 not counting the $5000 you have to  pay back. OUCH!

So what did we learn here?

  1. Title Loans are not by nature short term loans however if there is no prepayment penalty, paying if off fast is a really good way to get fast cash at a reasonable rate.
  2. Never take a title loan out and take the full term to pay it off. You will be paying so much money for it you will dislike the experience.
  3. ONE POINT on that monthly interest rate means a LOT of money so always try and get that as low as possible and don’t be afraid to ask… or even demand. They don’t want to lose you to their competition even if it means they make less money.

 

PAYMENT AMOUNTS:

Your payment amount is determined by how long you take out the loan and the loan amount.  Some people borrow to the amount they can fit in their monthly budget and not based on how much they need. Example is you are offered $5000 but you see the payment is $532.35 for 2 years. Way to high. You need it $100 less per month. The title loan company would write the contract for 42 months then. Longer terms lowers the payment but raises what you would pay in interest.

So you want to pay off the loan in 24 months, not 42… lower the amount you borrow. If you borrowed $2510 you would have a monthly payment of about $250.

So you can adjust the amount of your payment based on the length of the loan OR the amount you borrow…or both.


HOW YOUR CAR IS VALUED FOR A TITLE LOAN:

There are 5 main things the title lender needs to know on the car itself:

  1. Year
  2. Make
  3. Model
  4. Mileage
  5. Trim package and extras you have added since purchase such as aftermarket items (frequently overlooked and could make a difference between the vehicle not being qualified or not)

If you know the VIN number of your car, this will make it much easier and much more accurate to get the correct value.

 

Your VIN (Vehicle Identification Number) is easy to find. Open the drivers door and look on the side of the door. It’s there. It is also found on the drivers side window if you look from the outside in on the drivers side and look at your dashboard it’s there too. Also your VIN will be on your car title! You may also find it on your insurance card.

It will look like this:

 

Now that you have all the info that the car title loan company will want for the car, take pictures. Four sides and a picture of the dashboard odometer. Providing this speeds up the process of actually getting the loan and provide it to either us or the lender if we are that far ahead.

So now that the title loan lender has everything they need, how do they use this information to value the vehicle.

Each lender uses different programs. One uses Kelly Blue Book while another might use Black Book and while another might use their own software. The goal is simple… what is the cars AUCTION value right now. Meaning what is the value of the vehicle is right now they took it to an auction and it sold because in fact this is what will happen if you miss several payments. They want to see the true liquidated value of the vehicle. Then they loan a percent of THAT value. Anywhere from 50% to 90% depending on the rest of your information in your full application.

What they will not take into consideration is:

  • Sentimental value
  • Aftermarket products that harm the value
  • You thinking that the car is a classic when it has not officially been determined as a classic.

Please note that Salvaged Vehicles (it will say this on the title) has about 50% of it’s value lost before they even start the process. Some companies will not loan on a salvaged title. Check with us to tell you the lender that will.


THE LOAN CONTRACT AND WHAT YOU WILL NEED AT A SIGNING:

If you are going to sign in person, bring your ID, the title to your car and anything else that the lender has specifically requested. Some totally online lenders will have you Federal Express your title to them using THEIR label and you MUST go to an actual Federal express store…not a mail drop. In this case you will DocuSign the contract.

It is important to know that the date of the contract MUST be the same date you get the funds. If it is off by a day, you will need to resign another contract.

Depending on the state you get the loan, you may also be furnished with some additional documents for you to read and understand. Typical ones are:

  • Federal Privacy Notice
  • Understand your credit score and where it was pulled and what was the number.
  • An Application (yes even at this stage)
  • State Disclosure notices about Title Loans and loans in general.
  • How to make a payment and any online customer portals they have and how to access them.
  • Federal regulations pertaining to electronic funds.
  • One of the things you most probably be asked to sign is a Power of Attorney. This is needed so that the lender can act on your behalf in regards to the title lien holder addition.

THE CONTACT:

Typical contract sections (each lender is different and their contract may differ from this example):

  1. The first part is usually your general information such as your name, address, co-borrower and the lender information.
  2. The next part is usually about your car.
  3. The next part starts out with the agreement understanding of what you are doing.
  4. You will typically see the TILA disclosure which will look like this:

TILA disclosure

 

Remember the contract and the interest is figured out by the amount of months you schedule to contract. If you pre-pay the interest will be much lower.

 

5. You will see an itemization of the amount financed. This will show what you got directly, what was paid to others on your behalf and others such as DMV fees and admin fees.

6. Then there will usually be a section about your interest arte and the place to send your payments.

7. Definitions usually follow, with that companies agreement terms on that Definition. Examples would be Simple Interest, Payments, Prepayment, Late fees, Returned Payment Item Fee

8. There is usually a paragraph explaining the security interest the car title loan company has on your vehicle.

9. You should see a section on use of the vehicle. This paragraph basically is a “no funny stuff” type of verbiage like using it as a rental, intentionally altering it during the duration of the loan, attempt to transfer it and move it out of the country.

10. Insurance clause. Either you have it or they may get it on your behalf on charge you for it. Either way, the car must have insurance so that if you total it, they still get their money from the insurance company.

11. Default clause which is basically if you lied to get the loan or you file for bankruptcy. Also if you violate any part of the agreement.

12. Remedies. Explains what they will attempt to do if they need to collect if you don’t pay.

13. Extensions. Language talking about if they will or will not allow you to extend or skip a payment.

14. Maximum Rate as permitted by law. Usually it is them saying they will not exceed the legal rate allowed.

15. Power of Attorney. This allows them to sign your name on the title. You may also have another power of attorney to sign that the state needs as well.

16. Credit reporting and confidentiality: Most title loan companies report to credit bureaus.

 17. Your warranty: Basically saying you have the legal right to enter into the agreement

18. Severability. If some part of the contract is flawed does not invalidate the other parts.

19. Governing law. This is usually the state which will govern the contract legal rights for both of you.

There is usually an exhaustive “arbitration clause” with many paragraphs. This is done to push any disputes into a cheaper way to handle the disagreement.. which is arbitration… then force it to the courts.

There MAYBE a clause from the States Oversight department which will give you information you may need if you have an issue.

…and finally signature panels for you to sign and maybe also to get your fingerprint.


 

A typical signing takes about 20-30 minutes. Maybe longer. Read before you sign and make sure you get a copy of everything before you leave. That is your right.


HOW DO YOU GET YOUR MONEY:

Car Title loan lenders are finding more and more ways to get you your money. There is a few common ways found in 2017 and some lenders have found some not-so-common ways (which means that some have adopted the method while other have not)

COMMON WAYS:

  • Go directly to their store or location.
  • Go to a partner store. These are usually check cashing or money exchange centers.
  • If the state allows it, have a notary public meet you at a place of your choosing.
  • Have it wired to your account (same day)
  • Have it ACH’ed to your account (next day)

NOT SO COMMON WAYS:

  • Go to a MoneyGram location such as Walmart
  • Federal express a check to you

Check with the lender to see what options are open for your situation.


AFTER YOU GET YOUR MONEY:

When you got your loan, the lender would have advised you on how to make the payments. The larger companies have customer portals, just like at your bank, which will tell you your balance, your payments and what is owed. Most have a gateway to paying online.

Some companies require you to come in and pay in person. This also allows them to make sure you still have the car but again, usually it is the smaller companies who do this and the bigger ones have a customer portal.

Be sure to check and see if you can pay via Western Union to the lender. If you cannot pay online and you have cash and miss the deadline for the payment for that day, you can still pay (if they are set up for it) with Western Union and your payment will be dated the same day.


WHAT HAPPENS IF YOU CANT MAKE YOUR PAYMENT THAT MONTH:

The first thing people do is panic. Don’t. The natural reaction when you know you are about to miss the payment is don’t call and hope you can figure it out before the company repo’s the car. Repo is NOT the first, second or even the third step. Repo is when all the steps prior have ended with you not even trying to fix this.

Get all your courage up and call the title loan company and ask for an extension. That’s it. Not too hard. Most will do this for you.

If it is clear that even an extension won’t work because you had a hardship, ask for the monthly payment to be passed for that month. Explain why. Be honest.

The most important thing is to stay in contact and be proactive. When you hide, the lender will typically try and reach you by any way they legally can and that means possibly calling the people you listed in your references. They will email you, write you and call you. Avoid all this by calling them first and telling them what changed and what you can or cannot do.

Remember that on the other end of the phone is a not a mean collector but a person just like you. If you talk in a nice voice and you do not act aggressive or evasive, you will find a nice voice talking back to you.


AVOIDING REPOSSESSION:

The best way to avoid repossession is to keep the money flowing back to the lender…. even in small amounts. That shows you are trying. Even if it is partial payments, those small payments will help you in your conversations with the lender. They would rather repo a car from a person who is intentionally doing everything they can to avoid the repo by lying about their identity or making sure that they have no way to find the car. Although that may work in the short run, the law is on the car title loan lenders side.

  1. If you have not defaulted on the loan that means you still have time. Catch up your payments or try to catch up your payments.
  2. Stay honest. Keep your side of the road clean by not lying about your situation to the car title loan agent.
  3. See if another car title loan company will refinance the vehicle. Do this ONLY if it improves your ability to repay the loan.
  4. Propose a new loan with the company you have now but on better terms. It is cheaper than than a repo for the car title loan lender.
  5. If everything fails, consider working with the title loan company by making it easy to get the car. You bringing it to them will avoid the fees associated with repossession which you ultimately pay for.