In Time of Financial Need A Car Title Loan Can Get You Through

No matter what your financial situation or your credit history, there are times when everyone simply needs some cash. Whether it's a medical emergency, a vehicle breaking down, damage to property, or any other form of trouble, it is likely to cost some money. And if you haven't budgeted an emergency fund, you could be in trouble.

There are options. They can be risky, and they must be handled right, or you can end up putting yourself in awfully hot water financially. But for those who need immediate cash regardless of credit or other factors, one major option is the car title loan.

In a twist on the traditional pawnshop, a car title loan borrows your possession- sort of- and holds it as collateral. With a car title loan, you turn over the title to your car, and often a spare set of keys, in exchange for a certain amount of money. How much money depends on what type of car you have and each particular lender. You keep the car during the term of the loan, which is due in a lump sum payment- with interest- usually after 30 days.

Why is it risky? Because if you aren't aware of what you're getting into, you stand a very good chance of losing your vehicle. Car title loans should never be used by those in constant financial trouble, since it's very easy to get yourself into a hole. They're intended for emergency situations only- and for those borrowers who will be able to pay the lump sum at the end of the month. If the sum cannot be paid, then interest charges and finance fees will pile up very, very quickly, and the lender will eventually be free to take possession of your car.

It's a low-risk situation for the lender, since the amount of cash being loaned is typically a fraction of the car's actual value, so even if the borrower defaults on the loan the lender isn't losing out. Most lenders will not accept titles for a car over a certain age, so they are ensured a certain amount of value in the car being used as collateral. For the borrower, it should be considered a last-ditch effort, and one that they have every intention of following through and paying off on time.

It's certainly not the ideal situation. But the emergencies that arise in day-to-day life can't be ignored, and sometimes you just plain need the money. When you do, it's reassuring to know someone out there will lend it to you- even if you have to work extra hard to pay it back.