A car title loan in California is a loan product designed for taking out a small amount of money for a short period of time. Auto title loans are for citizens who need urgent finances to pay bills, manage debt or cope with unpredicted expenses. To receive a car title loan, a borrower should give the lender the title to his vehicle. It can be car, truck or motorcycle title. The standard repayment period is 30 days. However, terms and rates may vary from lender to lender.
Before applying for an auto title loan a borrower needs to make sure he is able to refinance the loan on time. If it happens that a borrower fails on repaying the loan, it will lead to a confiscation of the vehicle.
Car title loan is a secured type of loan, which means it is backed with a collateral. Since car title loan in California is secured, a borrower’s credit score is not the main reason for approving a loan. The size of a car title loan is determined by the amount of cash a borrower applies for, vehicle’s condition and value, and a borrower’s ability to repay the loan. As a rule, loan lenders tend to give out as much money as possible, and save the payments manageable. Moreover, application process is usually very quick and easy due to the possibility of applying online. Lenders allow start the application process online, and than contact you by phone or personally to complete the whole application cycle.
How does Car Title Loan work in California?
Car title loan is a type of loan that tends to range from $100 to $5,500. The amount a borrower can expect is equal to 25% to 50% of the vehicle’s value. The repayment term is usually not more than 15 or 30 days. Even if the name of this loan is “car title loan” any other type of vehicles, whether it is a truck or motorcycle, can be used as a collateral.
A potential borrower needs to provide a clear title to get the necessary amount of money. A clear title is a title that states a 100% ownership of the car, without any liens. Auto title loan providers will also wish to see borrower’s auto, a photo ID and proof of insurance.
When a borrower gets approved for an auto title loan, he is required to give his car title to the lender in exchange for the loan amount. As soon as the loan is fully repaid, a lender returns the title to the owner.
California Title Loan Cost – Rates and Terms
There are several car title loan varieties. Some of the loans must be repaid in a single payment. It implies that the borrower refinances the full amount of the loan including the interest rate fee within a set repayment period. Another type of loans means that a borrower should repay the loan over three or six months, depending on the lender. Except for the proof of insurance, ID and other documents, some lenders demand reserve set of keys.
A potential borrower must be prepared to finance the fees, that are usually quite expensive. The fees include an average monthly finance charge of 25 percent, which converts into the APR of 300 percent. If a borrower applies for an amount of $1,000, he is to repay additional $250 in interest, even if the repayment period was only 30 days. If it happens that a borrower fails to repay the loan on time and late payment penalties were included, the loan transforms into a huge amount of money to be repaid.
There are lenders charging origination, processing and document fees. Origination fee is a fee charged by the lender for the process of applying for a title loan. Processing fees are designed to cover online payments costs. Document fee is the type of fee that is charged for a vehicle’s paper work. After adding all three kinds of additional fees borrowing costs become even higher. There are lenders who will also require to obtain and pay for a roadside service plan for the automobile.
Car Title Loan Regulations in California
State laws regulate whether car title loans providers are licensed. The repayment terms of the loans and consumer protections for the loan or repossession of the vehicle if a borrower cannot refinance the loan in full when it is due are also subject to states’ regulations. CFA classifies the legal status of car title lending. It depends on whether the loan product is specifically authorized as triple-digit rates, whether title lending operates through legal escape clauses, or is prohibited in fact.
The standard monthly fee of a car title loan is about 25 %. This translates to Annual Percentage Rate of about 300%. Title lenders often charge additional fees to the loan amount, like late payment, processing, document, and loan origination fees. Lenders are obliged to inform a borrower about the cost of the loan in written from before signing the loan agreement. They must tell a borrower the finance charge, which is a dollar amount, and the APR, which is a percentage. If a lender refuses to provide this information, it is considered to be a violation.
|Maximum Loan Amount||Up to 50% of the vehicle’s value|
|Fees||Late payment or lien fee|
|Repayment Term||30 days|
|Prohibited Practices||Loan without clear title, loan more than the vehicle’s value|
The APR is the main determinant allowing a borrower to estimate the cost or benefit of loan amount. The APR gives borrowers and lenders a whole picture of how much interest they are earning or paying within a certain period of time. A borrower must be careful with what is included in the APR when signing any loan agreement.
How to qualify for an auto title loan in California?
The basic requirements for a car title loan obtaining is the direct ownership of the vehicle, without no liens against its title. Some loan providers require certain paperwork, that may include the following information or documents:
- Original title proving sole ownership
- Government-backed ID with the same name as on the title
- Proof of residence, it can be a utility bill with matching the name on the title
- Valid automobile registration
- Insurance of the vehicle
- Proof of steady income
- Personal information: names, phone numbers and addresses
- Reserve copy of the vehicle’s keys
There are lenders that require to mount a GPS tracking system in the car. This device helps a lender to win the right to repossess the car in case if a borrower doesn’t manage to repay the loan on time. There are also some devices that are able to disable the car remotely.
The main advantage of a car title loan is that a borrower doesn’t need good credit to apply for it. As a rule title-loan lenders do not run credit check at all, since the loan depends entirely on the value of the vehicle.
Car Title Loan for bad credit in California
Car Title lenders do not take into consideration the borrower’s credit history since there is a fallback option in case a borrower’s default on the payment. The lender has the legal right to repossess the vehicle when a debtor stops making payments. The car secures lender’s losses.
An unsecured loan — the type that doesn’t require a borrower to risk his personal assets for approval — basically has strict approval requirements and demand thorough credit checks. That happens because if a borrower stops paying, the lender has no other choice than selling borrower’s loan to a collection agency for pennies on the dollar.
To reduce that risk, lenders often analyze borrower’s payment history in order to avoid taking a big loss on a loan. And, again, if a borrower defaults on an auto title loan, the lender can sell the vehicle, and compensate most of the money lent to a debtor.
California Title Loan Alternative Options for Quick Financing:
In case you don’t own a vehicle to apply for a car title loan in California, consider other options to meet your emergency financial needs:
- Apply for California installment loans online. It will let you get up to $5,000 at competitive interest rates and convenient terms.
- If you need any amount from $5,000 to $35,000, Online Personal Loans in California will suit you perfectly.
- Credit card. It is cheaper if you can repay the card balance within 30 days till the interest starts to be charged.
- If you need a small amount of money, get instant cash advance with California Payday Loan same day.
- If you are a member of a credit union, consider borrowing form them.
- Ask your relatives or friends for help if it’s not too embarrassing and is not going to hurt your relationships.
- Make some extra cash with side gigs.
- Ask your employer for a payday advance.
- Apply to non-profit financial organizations for emergency relief assistance.
- Pawn some unnecessary items.
A borrower, who completely owns the vehicle is considered to be the best candidate for a car title loan with the largest chances for approval. A potential borrower has to understand the costs of the loan and how they form. Having a reasonable expectation from a car title loan will not lead to any unpredicted additional expenses. If a borrower has an access to the necessary amount of money to repay the loan before the repayment period expires, no financial troubles can occur. And conversely, if a borrower doesn’t realize what is the reason for applying for a car title loan and he doesn’t have realistic plan for paying it off, a car title loan can amount to selling the vehicle for half or less of its value.
Many title-loan borrowers renew their loans multiple times, making the financing much more expensive in the end. So, again, the most critical consideration is the ability to repay the loan on or before its due date.It is of high importance to thoroughly plan the budget and choose the proper car title loan option for a certain financial situation.
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