Life can be unpredictable and surprising. And if you suddenly find yourself in need of money to cover the costs of something unexpected, car title loans in Ottawa is one option you might consider.
These loans are a common option for those in need of quick cash. Especially, for people with bad credit or those who don’t want to undergo credit checks at all. Read on to learn about the details of car title loans, including how they work, pros and cons, and some possible alternatives you might prefer.
What Are Car Title Loans?
Car title loans, also known as auto title loans or just title loans are basically loans that are taken out against the title of your car. This means that you’re putting your car (or another vehicle) up as collateral in exchange for the loan. You can still keep and use your car in the meantime while paying off the loan. But, if you aren’t able to make your payments, the car can be seized. This is a really great video the simplifies how generally car title loans work:
Car title loans in Ottawa work similarly to around the rest of Canada. For these types of loans, you’ll need to usually own the vehicle, and you’ll typically be able to get a loan for the equivalent of up to half of the resale value of the car itself. These kinds of loans all have their own terms and interest rates. But, they typically run from just a few weeks to several months, but can be much longer.
Why Would I Want A Car Title Loan?
The number one reason most people want to get car title loans in Ottawa is due to bad credit. If you have a bad credit score, your options are quite limited when it comes to getting a loan. Many banks will deny you based on your poor credit score. Whereas, car title loans Ottawa are easy to get, even with bad credit, as long as own a vehicle. People get car title loans for all kinds of reasons, sometimes even to actually pay for repairs to their own vehicles.
The Pros and Cons of Car Title Loans
Pros | Cons |
SpeedOne of the main advantages of car title loans is just how quickly you can get approved and get the money into your account. Online applications are often treated in just 24 hours. While in person car title loan applications can be treated immediately, providing instant access to the cash you need. | High Interest RatesCompared to something like a payday loan, a car title loan won’t have the highest interest rates. However, compared to standard personal loans and installment loans, the rates can be quite high. Even on short term car title loans, you can end up paying back a lot more than you borrowed through interest. |
No Credit ChecksMany people with poor credit scores favor car title loans due to the fact that lenders don’t care about credit scores. Further, they sometimes don’t run credit checks on applicants. All they’re interested in is the car itself, which may need to be professionally inspected and appraised. But, your general credit score is of less importance. | Hidden FeesThere are some unscrupulous lenders out there offering car title loans, and some will charge lots of hidden fees to applicants. It’s vital, if you do decide to choose a car title loan, to compare lenders and read all the fine print on your contract before signing on the dotted line. |
Not Too RiskyCar title loans have risks. In the worst possible scenario, you can lose your car, putting your whole livelihood in jeopardy, so they’re definitely not risk-free, but they are much less risky than something like a payday loan, which can put people into large amounts of debt for years due to high interest rates. | The RiskThe ultimate risk with car title loans is that you could eventually lose your car. Some lenders will even fit your car with an immobilizer just to be sure that you aren’t able to use it if you stop making payments, and losing a car can be a major problem for people who rely on their vehicle to work. |
The Alternatives to Car Title Loans
Car title loans may seem like an attractive proposition to those with bad credit or people who need money quickly to cover immediate costs, but there are other options out there:
Personal Loans
Personal loans exist specifically to help people cover all kinds of costs. They’re provided by both banks and lenders, available to repay in installments, and typically come with much lower interest rates than a car title loan. You can compare loan providers around Ottawa to find a loan with interest rates and terms that work for you, but you will usually need a good credit score in order to get approved.
Bad Credit Loans
If you’re seeking a car title loan due to a bad credit score, there are actually bad credit loans and even no-credit check loans offered by lenders in Ottawa. When applying for a bad credit loan, you have the possibility to demonstrate to a lender that you are a reliable borrower. This can be true in other ways than purely through your credit score. You can show your income, how long you’ve been working, and prove that you have enough money to cover the regular repayments. Additionally, it’s much easier to get approved for this kind of loan if you have bad credit than a standard personal loan.
Other Options
If you’re considering applying for a car title loan, then it means you do own a vehicle. When in need to have cash quickly, some vehicle owners prefer to sell off their current vehicle and downgrade to a less expensive model. This in order to raise funds without needing a loan.
Frequently Asked Questions About Car Title Loans
Do banks give loans on car titles?
It depends where you’re from specifically. For instance, in some Canadian cities – like Toronto – banks and credit unions won’t accommodate car title loans. So you’ll have to avail the service from other lenders. It helps to research your locality first to find out where you can get a car title loan. Call your bank and ask if it’s a service they provide. Otherwise, you might have to seek out an alternative lender.
Can I get a car title loan if my car isn’t lien free?
Most car title loan creditors will only accept vehicles that are completely owned. That means you shouldn’t be making payments for the car to any dealership, lender, or financial institution for any amount that you might owe on your car. However, there are some exceptions to the rule. If the amount you owe is small enough, a lender might still agree to approve your car title request. Typically, if they can sell your car and make a profit even after taking the amount you owe into account.
What if I fail to meet payment deadlines?
The thing about collateral loans is that lenders will feel relatively secure even if you fail to meet payment deadlines. That’s because they know that when push comes to shove, they’ll be able to repossess your asset. Additionally, cover their losses, and make a profit along the way.
Fortunately, a single delayed payment won’t immediately warrant that your car be pulled out. But there will be fees. Your lender and even your bank might require that you pay a certain amount to pay for your delay. But once you reach the maximum grace period and you’re still unable to pay, your lender can activate the GPS and ignition immobilizer to start the repossession process.
Keep in mind – even getting your car pulled out will incur a fee that you have to pay for. So to pay the least amount possible, try to settle your repayments on schedule.
What happens if they seize my car?
If it reaches the point where your lender has to take the car, then they’ll sell it to cover the remaining amount of the loan. That includes any fees and charges included in the transaction that you failed to pay. If they’re able to sell the car for more than the remaining loan amount plus interest plus other charges, then you will be given the excess.
However if there is another lien on your vehicle, then the excess amount will go towards paying off those liens. In Canada, lenders in some territories and provinces will require that you pay for the balance. This is especially true if the sale of the car is unable to cover the cost of the loan.
What if I’m unable to pay the balance?
If the car is sold for less than the remaining loan amount and you’re unable to gather the funds to pay off the balance, then your lender has the option to sue you. Legal proceedings can be messy, and there will be consequences.
Worst case scenario is that you’re pushed to file for bankruptcy. This relieves your debt momentarily, preventing creditors from chasing after you to take payments or to seize your assets. But keep in mind – the filing for bankruptcy isn’t an easy way out. The action will have a permanent impact on your credit score. Consequently, you might not be able to obtain any loans or similar financial services in the future.
What to Consider Before Applying for a Car Title Loan
It’s important not to feel too confident when taking out any sort of loan because of the commitment and discipline it takes to successfully pay them back. If you’re thinking of applying for a car title loan, make sure you sit down and consider these points. This is important to determine how prepared you are for the responsibility.
How much you’re can pay monthly
Utilities, groceries, unexpected expenses, daily needs. All of these things need to fit into your monthly budget along with the payments you make for your car title loan. While it might be tempting to max out the lend-able amount for your specific car, it might be better for you to settle with a smaller amount.
When taking out a loan, always choose the value that covers exactly what you need the loan for. If you’re paying for a medical expense, limit the loan amount to just that. This prevents you from taking more money that you need. Also, increasing the amount you can afford to pay on a monthly basis.
What you plan to use it for
Loans should always be used towards purchases or expenses that will serve as investments in the future. Certain costs – like vacations, celebrations, or an unnecessary new appliance – should not require that you go into debt.
Although it might be alluring to pawn your car thinking to be able to afford a travel experience or a fancy party, you need to consider the risk that comes with the loan. Losing your car and damaging your credit score shouldn’t be a risk worth taking if you’re spending the loan on a fleeting expense.
What other loan options you have
Just because you have a car, doesn’t mean you should opt for a car title loan automatically. There are lots of other types of loans that you can try, including payday loans that are just as quick to apply for and be approved for.
If you have time to spare, consider taking out a personal loan from a bank or another trusted financial institution. Although they might take some time to process and approve, a traditional personal loan should give you a better interest rate and an extended term that can help lighten the financial load on your shoulders.
You might also want to consider taking out a loan from family and friends. With this kind of set-up, you can negotiate an even lower interest rate. Additionally, a longer loan term with less strings attached. Sure, that doesn’t mean you can lag behind on payments. But with far less pressure on you and no fear of repossession, it might be less stressful to borrow from someone you know.
Managing a Car Title Loan
Set your budget straight
If you took out a car title loan to get your hands on quick cash, then odds are, you’re in a stick financial situation. If that’s the case, then you might want to consider downsizing your lifestyle to a bare bones budget system so you can minimize the risk of missing your deadline. Lay off of the luxuries and unnecessary expenses you tend to spend your money on and funnel all of your excess income into paying off your debt.
Negotiate with other bills
Some utilities might let you negotiate for a smaller monthly bill, especially if you’ve been a loyal customer. Call up your internet and cable service provider and ask whether they have any ongoing promotions they can offer to help you reduce your monthly bill. You also have the option to downgrade your subscription in order to avail a lower monthly charge.
Don’t avoid your lender
If you’ve missed your deadline and you’re starting to get calls from your lender, the last thing you should do is try to avoid them. Lenders want to know that you’re at least trying to make it up on a delayed payment, and refusing to take their calls might rub them off the wrong way.
Remember, there’s nothing wrong with being upfront and truthful about your situation. In fact, some lenders might feel more compassionate towards borrowers who are open about their reasons for missing a payment compared to those who deliberately avoid calls and reminders.
Conclusion about Car Title Loans in Ottawa
A car title loan isn’t simply an easy way out of a financial rut – it’s a responsibility that requires your full dedication. Although they can be incredibly beneficial especially in times of financial trouble, they’re not a one-size-fits-all solution. Car title loans should only be used on urgent, important, necessary payments and purchases.
With that, intelligent borrowers can maximize the potential of a car title loan to cover any expenses they have. Furthermore, bridge a money gap without rattling their finances too much. With the right consideration and deliberation, you can use a car title loan to better your situation. Incurring a small debt over a short period of time, and giving you the leverage to leap into more stable waters when it’s all paid off.
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