A title loan is a secured loan in which a borrower uses his vehicle as collateral. The borrower must temporarily hand over the hard copy of their vehicle’s title and allow the lender to place a lien against the car’s title.
Once the loan has been repaid, the title is returned to the owner and the lien is removed. But if the loan isn’t repaid, the lender can repossess the vehicle and sell it to recoup the money lost on the defaulted loan.
Title loans are usually short-term (often just 30 days) and they tend to carry interest rates higher than other options like credit cards. But they do not require a credit check and a borrower can typically get the loan money in a half hour or less.
Since I don’t have any firsthand experience with title loans myself, I reached out to a reader named Doug to get the scoop on why he decided to take out a title loan.
Doug was working as a salesman at a car dealership but he wasn’t happy and was looking for a new job. A college friend of his hooked him up with an interview for an insurance company but the interview was only a few days away and Doug wanted a new suit to make a good impression since his old ones were a little shabby.
The car dealership where Doug worked paid its employees monthly. Doug knew he had some commissions coming at the end of the month but he didn’t have any cash on hand to buy a new suit and his credit cards were already maxed out.
Doug thought about his options and did a quick Google search for “title loans Columbus” to find a lender in his area. Within a few hours he had driven to the lender, gotten his money, and gone suit shopping.
At the end of the month he received his paycheck and paid off the title loan. He also aced the interview and landed a job at the insurance company.
In Doug’s case the title loan worked out well because he knew he had money coming to him at the end of the month and just needed the money to hold him over until then. But remember if he hadn’t been able to pay it back for any reason he could have lost his car. You should always use caution with title loans and make sure you understand the terms before signing anything.