You have to mortgage your car and if you default in payment, you are at risk of losing your car. In simple words, car title loans keep your car as collateral. While taking the loan the borrower has to provide a separate set of keys to the lender. In case there is a default in payment, the lender has the right to forfeit the car and sell it.
Car Title Loans: High Interest High Risk
In all probability, such loans should have a lower rate of interest, but that is not the case. Interest rates for car loans in this category are as high as 300% per annum. Moreover, these loans hardly cover the cost of the car. In fact, car title loans cover only half the value of the car.
In most cases, the borrower is often unable to bear the cost of maintaining the vehicle, and defaults in payment. In such a case, he has to pay an additional fee to the lender to save the car from forfeiture. The lenders in such cases extract their pound of flesh by charging enormous fees, which sometimes is even more than the cost of the car.
Simple Interest Best Interest
It is in the best interest of the buyers to go for easy online car loans, which offer simple interest. Simple interest is interest charged only on the principle and not on the interest added to the principle. Most of the cheap car loans offered on the Internet charge simple interest, but there are also many loan sharks offering other loans to cash strapped individuals.
Lookout For Prepayment Penalties
While searching for a car loan, ensure that your lender company does not impose any prepayment penalty, in case you decide to pay the loan earlier than its term. Lending companies are looking for maximum returns on their credit, and therefore, if you decide to pay earlier, it cuts on their interest. To act as a deterrent, some companies put clauses in the car lease for charging prepayment penalties, which is a bad practice. Borrowers have every right to reduce their debt by any means possible – prepayment or refinance. Never be hasty in your decision, the car loans market is very competitive. If one lender does not offer a satisfactory deal to you, look for another one. You will find many tempting deals on offer, of which one will surely satisfy your longing to get your hands on that dream car of yours.
Car title loans put your car at risk. If you default in payment, the lender has the right to forfeit your car and sell it to cover the cost of the loan. With easy online car loans available with a mouse click, comparing offers for car loans has become simpler. Look for online car loan rate calculator on websites of different lenders and fill the online car loan application with the one offering best car loan rate.