Do Title Loans Affect Credit Ratings?

Are you looking for affordable title loans these days? Well, there are many title loans providers you can rely on both locally and online. Yes, you get it right! Title loans are easy to apply nowadays. You just have to search for a credible title loans company, ready your car’s title and comply all their loan requirements. From there, you will surely have a good start when applying for a title loan. But, like other forms of investments, do title loans affect credit ratings? Then, let’s check these out!

Do title loans effect credit scores

 

What Is A Title Loan?

A title loan is considered a short-term loan payable for a shorter period of time. If you are interested in applying, all you need to do is put your car up as collateral to secure the loan and get approved.

  • These title loans work in such a way that lenders would place a lien against the title of your vehicle until payment is made in full.
  • The loan amount you’ll get after your approval is based on the current value of your vehicle at the moment you apply for it.

So, the process is just simple. You offer your car title as a guarantee, and you’ll have your money once approved. Sounds good, right?

What Are The Requirements Needed To Apply For A Title Loan?

When you are submitting a loan application, you can notice that there are many loan requirements to fulfill. These things may appear burdensome especially when you don’t have these ready ahead of time. But, with title loans, such requirements are considered immaterial.

  • This is so interesting as you just have to prepare the necessary requirements such as identification cards, proof of source of income, your residence address, contact information and of course, your car title.
  • If these documents are already well-prepared, then, you are good to go to receive your title loan as fast as you can least expect. Well, you can even choose the kind of vehicles you want to use to get a title loan as quickly as possible.

 

What Are The Effects Of Getting A Title Loan To Your Credit Ratings?

This is the most crucial part when dealing with loan applications. If you apply for a loan, the first thing that comes to mind is your credit ratings. Questions like, “How would my loan affect my credit score?” or “If I am unable to pay my loan, do title loans have a negative impact on my credit score?” Well, these are just two of so many questions you’ll most likely ask when you apply for a loan. But, here’s the catch now: Title loans are regarded as secured loans.

  • For that reason alone, you’ll be assured that you can pay your loan no matter what. When worst cases happen as you will be in default in paying your monthly amortizations, then, bear the consequence of having your car forfeited in favor of the lender in exchange for your title loan.

From there, you will be left with no choice but to say goodbye to your car. This would be the worst nightmare for you.

  1. The Effect of High-Interest Rates For Title Loans: For title loans to apply, it is compulsory for you to own a car as it will be used to guarantee your payment once default may happen. This process sounds easy, right? But, you may be missing the point here. After taking out your title loan, you’ll have an instant money, and everything about it feels good.
  • You are most likely unaware that the problem may start three to six months after making your monthly repayments. As they are short-term loans, they also carry high-interest rates when availed.
  • Because of that and those unforeseen circumstances, you’ll be possibly unable to pay your loan as expected from you monthly. If this case happens to you, then, you’ll start thinking about your credit standing.
  1. The Impact of Car Title Loans to Credit Ratings: Well, a credit standing is essential to a better and healthy financial life. In fact, thirty-five percent of your credit score is about your payment history. Such thirty-five percent is your so-called credit utilization. You’ll be wondering how the payment history impacts your credit score.

The answer is also easy. The higher your credit utilization is, the smaller your credit score is. Not only that, getting a loan may have a significant effect on your credit score percentage. This is mainly making sense as secured loans like car title loans may also have the potential of positively or negatively affecting your credit score. Nevertheless, an effect to your credit score is not always true with title loans. Yes, you get it right!

  • Unlike other types of loans, title loans work differently in some financial aspects. When you avail yourself of a title loan, you are not also leaving your credit ratings a lasting effect. Do you want to know how? Then, let’s take a look at these.
  • The process of applying a title loan is not the same with other personal loans. While some personal loans require thorough credit checks, title loans do not need these credit inquiries at all. It is because your credit ratings do not really matter since you borrow money and hand over your car’s title as collateral.
  • Here, you are using your car as your line of credit. As a result, your loan amount is not put as debt in your credit score because whether you fail in your payments or not; the lender has nothing to lose at all.

Usually, when you have a good payment history, your credit score raises to a reasonable value. A car title loan when paid has nothing much to contribute to your credit standing. There may be a little but not that much.

  1. The Possibility of Losing Your Asset: If you have plans to get a title loan, then, you have nothing to worry about your credit score. However, here comes now the potential risk.
  • Although such loans do not have substantial detrimental effects on your ratings, the possibility of losing your car in default is also apparent. That is why you are still required to take necessary precautions when applying for car title loans. Do not wait for the time when you’ll be out of control with your finances.
  • Take time to plan well your financial goals and ensure on-time payment as much as possible. By doing so, you’ll get rid of the likelihood of having your car sacrificed due to your negligence.

Conclusion

If you are sure of availing yourself of a title loan, consider the credibility of your loan provider. After all, it is your financial health that would benefit or suffer from your decisions. Hence, make financial choices wisely.