Auto title loans have become a very popular form of lending for those who may not have the desire or option to borrow from a traditional lender such as a bank or credit union. Lenders offering these types of short-term loans can be found online as well as in storefront locations.
Applying for an auto title loan, also called a car title loan, is simple in most cases. An applicant can apply on line or in store with a minimal amount of information including the applicant's contact information, employment status and monthly income amount. It is mandatory, in most cases, for the borrower to have a checking account with direct deposit of their paycheck as that is how the lender receives loan payments from the borrower.
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Loan amounts range from $100-$5,000 depending on the state the borrower lives in (states independently put caps on how much a lender can loan) and the value of the car or truck. The borrower is obligated to hand over the title or "pink slip" to the car as collateral for the loan. Should the borrower find they are unable to repay the loan; the lender has the right to repossess the car or truck.
One of the most attractive aspects of an auto title loan online, besides the ease and amount in which they are given, is that an applicant's credit score is not part of the loan process. In other words, the lender will not run your credit history when determining whether or not to approve you for a loan. This is why consumers with bad, little or no credit at all find these types of loans so appealing.
Because credit history is not considered when applying, it is not a part of the repayment process either. Normally, when you take out credit in the form of a mortgage, auto loan or credit card, your payment history goes on file with the three credit bureaus. How responsible you are with repaying determines you credit score. If you are late or in default you credit score will be affected negatively and you may be considered high-risk for future borrowing. When you pay on time and in the required amount, your credit score benefits and you are seen as being credit worthy. The higher your credit score, the more purchasing power you gain.
Some consumers purposely take out a credit card or personal loan for the sake of building their credit score or creating one if they haven't had credit before. Keeping a small balance with payments that realistically fit ones budget is the best way to carry credit. Taking out an auto title loan for the purpose of building you credit is not only futile, since auto title loan lenders don't report to credit bureaus, but can put you in a compromising position financially as they carry very high interest rates and loan fees.
An auto title loan can be considered a secure form of credit in that you are using your car or truck as collateral but will is boost your credit rating? Not this time.
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