At some point or another, many people find themselves in need of money they don’t have at that precise moment in time. Loans can be life-saving in these situations. Helping to cover the costs of anything from car repairs to medical bills. But, if you have bad credit, your options are limited. One possibility you might consider is car title loans. This article will cover all you need to know about car title loans in Vancouver. Including, the advantages and disadvantages of car title loans. Finally, some alternative options that might provide better value and more safety for you as a borrower.
What Are Car Title Loans?
You might also see car title loans referred to simply as ‘title loans’ or ‘auto title loans’. However, they aren’t only exclusively related to cars. They can work with most vehicles. In this type of loan, you put up your car as collateral in exchange for credit. Basically, you’re borrowing against your vehicle. This lets the lender repossess and sell that vehicle if you aren’t able to keep up with the payments.
Car title loans in Vancouver are sometimes known under the name ‘vehicle collateral loans‘. You usually need to own or at least have some degree of equity in the vehicle in order to be approved for a car title loan. Most of these loans are usually for quite small amounts, ranging from a few hundred to a few thousand dollars, and they tend to have terms of a few weeks or months, but can be for longer durations and larger amounts. This is a great video we found that breaks down car title loans very simply:
Why Would I Want A Car Title Loan?
Car title loans in Vancouver are often chosen by borrowers with poor credit scores. If you have low credit, getting a regular personal loan or installment loan from a bank or lender is more difficult. A car title loan is an easy way out. Since, your credit score doesn’t actually factor into the approval process. The only thing that matters for these loans is that you have a car. Alternatively, another vehicle like a motorcycle, boat, RV, or trailer.
The Pros and Cons of Car Title Loans
Pros | Cons |
Bad Credit Doesn’t MatterThe top advantage of car title loans to many people is that bad credit scores are sometimes irrelevant in the application process. Since you’re putting the car up as collateral, the lender is covered whatever happens. So, they don’t mind if your credit score is low or if you have bad credit history in general. | Losing Your CarWith a car title loan, you have to accept the possibility that you could end up losing your vehicle. If you can’t keep up with the payments, perhaps due to the high amount of interest or other unforeseen circumstances, losing your car could throw your whole life into jeopardy, making it much harder to work each day. |
Better Than Some AlternativesWhen compared to an alternative like payday loans, car title loans tend to offer better interest rates and aren’t quite as dangerous. In the worst case scenario with this kind of loan, you’ll lose your car. Meanwhile, the worst case scenario with something like a payday loan is that you spiral into unmanageable debt. | Interest Rates and FeesCar title loans aren’t the most economic option out there. Interest rates can get as high as 60% per year on these kinds of loans, so you can ultimately pay back a much higher amount that you initially borrowed. Not only that, but there are often many application fees that need to be paid as well. |
Very FastCar title loans are popular with some bad credit borrowers due to how quickly they can be approved. If you’ve got bills to pay right away, these loans can give you the money you need in a matter of hours. Most borrowers can get paid by the next business day when applying for this kind of loan. | Unscrupulous LendersSome lenders can be trusted for car title loans in Vancouver, but others are far less trustworthy. The worst lenders can force borrowers into paying lots of hidden fees and charges when applying for these kinds of loans, as well as charging high rates and even going to extreme lengths like attaching an immobilizer to your vehicle. |
The Alternatives to Car Title Loans in Vancouver
While car title loans might seem like the only option to those with bad credit in need of money quickly, there are other options out there:
Bad Credit Loans
If you’re looking for a car title loan, it’s probably because you have a poor credit score. However, payday loans and car title loans aren’t the only options for those with bad credit in Vancouver. There are also bad credit loans. These types of loans are usually only found with lenders, rather than banks. But, they can be a better option than a car title loan. This is because they’ll often have better interest rates. For a bad credit loan, a lender will ask to see proof that you can keep up with the repayments. So, if you can demonstrate that you have a job and enough regular income to pay off the loan, you can get approved quite quickly and easily.
Installment Loans
Banks and lenders also provide a range of installment loans. These loans can be applied for in order to cover the costs of everything from vacations to medical bills and more. For these kinds of loans, you’ll simply pay them off in regular monthly installments. Many of these loans will require good credit. Especially, if you’re applying with a bank. So, you may need to build up your credit score by using credit cards, paying bills, and paying off any outstanding loans you already have before being approved.
More About Car Title Loans in Vancouver
Fast and accessible to most, car title loans are an attractive source of cash for people who might be facing difficult financial situations. Essentially, these transactions let you take out a sum of cash against the title of your car. They’ll usually credit you with 50% of the appraised value of your vehicle. In this case, you should have to pay within a few months or years’ time.
Given that you’d be able to pay repay the loan within the given term, a car title loan can be an effective way to get your hands on cash. Especially, in time-pressured situations. But, before you decide to take one out, there are some considerations worth taking into account.
Understanding the ins and outs of car title loans should give you a deeper idea of the risks and benefits of these types of loans. The better you know how they work, the easier it should be for you to determine whether they’re appropriate for your situation or not.
How Does a Car Title Loan Work?
In essence, a car title loan works like pawning. The creditor takes hold of your car’s title as collateral for the loan. In Canada, they’ll usually approve your loan for up to 50% of the appraised value of your vehicle. Throughout the duration of the loan, you’ll still be able to use and drive your car as you please. But if you fail to make your repayments, your lender will have the right to pull your vehicle.
The Process of Applying for a Car Title Loan
Car title loans can be considered similar to payday loans. The sole difference that the equation includes collateral. In that sense, you can expect that the application and approval process for a car title loan would be relatively quick.
Lenders in Canada will typically follow the same procedures for a car title loan application. For the most part, you might expect to have to go through these steps:
Apply for the loan
Clients will typically have the option to apply for their car title loan at the lender’s physical office. Or, through an online facility. In an attempt to make their loans even more attractive to clients who might need them, some lenders use a strictly internet-based correspondence for the first steps of the application process. Once approved, that would be the only time that clients would be required to make a physical appearance.
Bring in your car for an appraisal
As soon as you receive the approval from your lender, you will be requested to bring in your car to have it appraised. In Canada, most lenders will cap their loanable amount to just 25-50% of the car’s appraised value.
During this part of the process, your lender might request that you provide certain documents. These should prove the information you indicated in your application, your identity, and your ownership of the vehicle. They would also be interested in knowing more about you as their client to identify your eligibility for the loan and any potential risk they might undertake by approving your request.
Document requirements vary from lender to lender. In most cases, you’ll have to prepare some of the following paperwork:
- Original vehicle title demonstrating that you are the sole proprietor of the car
- Two or three government issued ID’s that match your name on the car title
- Any bill to prove your current residency
- Car insurance documentation
- Updated vehicle registration
- Proof of income or proof of employment
- Contact information for at least two valid references who are not relatives
- Two working copies of the vehicle’s keys
Sign the necessary documents
If the lender finds that everything is in order, and you’ve decided to push through with the transaction, then you’ll go through the contract signing. A contract using the standard stipulations of the lender – including some particulars that you might have negotiated and agreed upon – will be issued to you to read and sign.
Surrender the title
The end of the procedure requires that you surrender your car’s title. Of course, you can also expect that your lender would release the loan at this time which will typically be credited into your bank account.
In some cases, a contract might stipulate that the lender be given the right to attach a GPS tracker to your car. In these cases, it would be in order to trace its whereabouts should you fail to make your repayments. A few creditors may even install an immobilizer that the lender can remotely activate to stop your car from working.
When you’ve successfully paid off the whole loan amount, your creditor will then release the car title back to you. This includes any key copies that they might have requested. Any devices attached to your vehicle will also be duly removed.
What are the Benefits of a Car Title Loan?
When properly used, a car title loan can be a smart and efficient way to get cash fast. Furthermore, without incurring a long-term debt. In many cases, car title loans have been instrumental in bridging the financial gap for many individuals going through tough times. Here are some of the advantages you can expect out of a car title loan:
Fast approval
Car title loans are designed especially for people who need a quick source of credit. Much like payday loans, they don’t require a tedious application process, letting you get a hold of the loan amount within just a few days’ time from the date you submitted your application.
Credit rating doesn’t matter
In Canada, around 2.85% of individuals possess an extreme risk credit rating. Meanwhile, over 20% of the working population falls within the poor credit score range. For these people, finding and securing a loan can be a herculean challenge.
In any case, any loans that these people might qualify for might come with sky-high interest rates. But, with a car title loan, your credit score will mean little. That’s because the collateral will offset the risk that the lender undertakes. So even if others would see you as a high-risk borrower, that wouldn’t mean much to an entity granting a car title loan.
Better interest rates
A car title loan will give you far better interest rates compared to other types of quick cash loans. Mainly, that’s because the car title loan is secured against collateral. So even if your lender doesn’t make a lot on the interest that they charge, they stand the chance to take ownership of your vehicle should you fail to pay.
What are the Disadvantages of Car Title Loans?
Of course, there’s no such thing as the perfect loan. Some aspects of the car title loan might put you at a disadvantage. Knowing exactly what these cons are should help you plot out strategy so you can maximize the advantages without taking on too much of a financial risk.
Possibility of losing an asset
Your car is an investment and an asset. If you fail to pay back the loan when it’s due, then you might have to say goodbye to your car. Unfortunately, if your lender is only granting you 25-50% of the car’s appraised value that means you incurred losses on your car’s value.
If you think that you might not be able to repay your loan on time and that your car might be taken away, consider selling it instead. Even quick car sales can give you up to 25% more than they would grant you on a car title loan. So if you’re certain you can’t repay and you need quick cash, explore your options first.
Expensive
While a car title loan will have a typically lower interest rate than payday loans or installment loans, they’re still more expensive than traditional personal loans. Sure, the interest rate might vary from lender to lender. But some can bake up to 60% of interest into the amount you repay per year. So if you’re borrowing $1,000 against your car title to pay off in the span of a year, you’ll have to pay as much as $1,600 to get it back.
On top of that, there are the other fees and charges. Some lenders will have you pay for lien fees, origination fees, processing fees, and document fees. So while you might think you’re getting a reasonable amount out of the deal, all of these fees might be deducted from the total you get.
Short loan term
In Canada, a car title loan term will typically stretch from 3 months to 3 years, making them pretty short. If you choose the longer loan term, the higher the interest you have to pay. With a shorter term, you can expect to pay far less in interest, but then there’s the predicament of meeting your payment deadline.
Final Thoughts About Car Title Loans in Vancouver
Money can be fickle, and cash flows won’t always behave the way you anticipate even if you try to write things down and decide on a budget. So if you’re opting for a car title loan in Vancouver, it’s imperative that you understand your income fully so that you can properly calculate whether you’d be able to meet payment deadlines.
- Car Title Loans Vancouver
