The first step to getting a car title loan is preparing for the loan. As part of preparation you should determine whether or not one makes sense. This is not the case for everyone, despite what some lenders say. Title loans are not the answer to all financial problems.
In fact, by definition, car title loans are short term solutions. They should not be long term loans or try to be used to solve a long term financial problem.
Why Title Loans are Not Long Term Solutions.
The reason title loans are not long term solutions is cost. Most, if not all, title loans are high interest loans by comparison to other loan types. When you amortize a high interest loan for more than a year the costs increase significantly.
The main reason to increase a loan’s length is to decrease the monthly payment. This is to ensure the loan is affordable. There has to be a balance between finding an affordable payment and keeping the total loan cost reasonable.
Does a Title Loan Make Sense?
Back to preparing for a title loan and answering the question of whether or not one makes sense. For a title loan to make sense it should solve a short term financial problem. Additionally, you should be a good title loan candidate and meet the online title loan requirements.
Some of the high level items to look at include:
- Having a lien free title
- Drivers License
- Short term financial need
- Vehicle to support the loan
- A loan term that results in an affordable loan
There are some other items to look at, such as the cost benefit analysis. In other words, does the benefit of the title loan outweigh the cost of the loan. Not sure how much title loans cost? Use our car title loan calculator to find out costs and payments.
Completing Step 1: Preparation
Before moving on to Title Loan Preparation Step 2 you should be able to answer the question “Does a title loan make sense?”. This means deciding if the benefit received from the loan is worth the cost, determining if the vehicle can support the loan amount, and finding a loan length that results in an affordbale monthly payment.
Additionally, you will want to make sure the loan length also results in a total loan cost that is reasonable. It doesn’t do you any good to get an affordable monthly payment if the total loan cost is more than the vehicle is worth. This can happen if you extend the loan too long.
Move on to Title Loan Step 2:
Once you complete step 1, move on to step 2: