What is a Car Title Loan? Is Refinancing Better?

Michelle Hale
Greater Nevada Credit Union
Have you ever passed a title loan center wondering how it all worked and if it was a good idea?  Suppose you own your vehicle free and clear and could use some extra money.  Maybe you have a credit card bill at 22.9% with no end in sight.  You could use your vehicle as collateral (based on the value of your vehicle) to pay that bill by obtaining a car title loan. 

To put it simply, take a look at this definition on vehicle title loans from Wikipedia:

“In the United States, a car title loan, is a type of secured loan where borrowers can use their vehicle title as collateral.[1] Borrowers who get title loans must allow a lender to place a lien on their car title, and temporarily surrender the hard copy of their vehicle title, in exchange for a loan amount.  When the loan is repaid, the lien is removed and the car title is returned to its owner. If the borrower defaults on their payments then the lender is liable to repossess the vehicle and sell it to repay the borrowers’ outstanding debt.” 

Sounds easy enough, right?  Although the process may be simple, it doesn’t mean that it is the best deal. Car title loans can be dangerous because they often come with high interest rates. There may also be several fees and the potential to have your car repossessed if you miss so much as one payment. To read more about the dangers of title loans and other similar types of loans, visit U.S. News.

Instead of choosing a title loan, another option is to refinance. Greater Nevada, for example, offers members the ability to refinance their vehicles for extra cash without the high interest and penalties. Also, unlike a title loan, you do not need to own your vehicle free and clear so long as you have equity in it.

Take a look at some of these frequently asked questions regarding how to refinance with Greater Nevada for extra cash:

Do you check credit history?

                Yes, your Experian FICO will be pulled to help determine rates and terms.
 
Can I get any amount that I want?

No, the loan will be based on the worth of your vehicle and if you meet the requirements at the time you decide to do the refinance.  Depending on the worth of your vehicle, you may have the option to choose a lower amount than the value of the vehicle.

What you may need to have before calling Greater Nevada:
  • Equity in your current vehicle
  • Current insurance
  • Current registration
  • Valid driver’s license
Refinancing your vehicle is a great alternative to getting a title loan.  For one, it will help to make more affordable payments without any hidden penalties.  Plus, it doesn’t cost you more to pay the loan off early.  Click through to check out our rates and loan calculator or to learn more about refinancing your car.
 
 
7/08/16