An auto title loan is an excellent way in which to get the money you need as quickly and conveniently as possible. There are many ways to apply, and if you qualify you can get the money you need in as little as one business day.
Before you decide to apply, however, you should think about what you want as far as loan terms. Loan terms include the dollar amount of your monthly payments and how long you have to pay back the loan. These terms are customizable for qualified customers, so it would help to have some idea of what you’d like to do before you get to that part of the process.
You’re getting an auto title loan because of a financial need. There might even be some issues with your credit or a lack of funds in general. It is best to take these things into consideration before deciding on what you can afford to pay each month. Grab a piece of paper and notebook and do a quick budget calculation. First, write up your monthly income. Then estimate the following:
And don’t forget to include “entertainment” costs in there, if you can afford it.
Now, add that list together and subtract it from your monthly income. That should give you a rough estimate of how much money you’ll have left over. Looking at that number, how much can you afford to pay each month on your auto title loan?
Now you have to consider how long you’ll need to pay back the loan. Questions you’ll need to ask yourself include:
Remember that the longer it takes you to pay back a loan means the more you’ll pay in interest. Sure, those smaller payments might help you now, but will you actually lose money in the long run? For some people, it might be beneficial to set up a term that includes smaller payments for a longer period until their financial situation is stabilized. Then they can begin making larger payments to pay back the loan ahead of schedule and not spend as much in interest.
Imagine, if you will, that you have a newly completed project car, a 1972 Dodge Charger. You also have your “weekday” car, a 2009 Nissan Sentra. Both are paid off, both are in your name. However, a blizzard of snow collapsed your roof, you need cash now and have to pick one as collateral on an auto title loan.
Which do you choose?
The answer may not be what you think at first. Before blindly picking a car for something as important as a title loan, there are a couple of factors one must take into consideration when deciding which car they’ll use:
In the example above, your roof collapsed. According to AngiesList, replacing a roof can cost an average of $12,000. But your calculations shouldn’t stop there. What above the costs of replacing damaged furniture? Lighting? Clothes? Do you need to stay in a hotel?
Those are the types of calculations you’ll need to do before moving forward with an auto title loan. If you need money for an emergency trip, don’t just look at the plane ticket cost. Consider the food, lodging, gas, and incidentals that inevitably will occur. If you have an unforeseen medical expense, consider not only how much it’ll cost, but how much money you may lose from being out of work or the initial cost of medications. If you plan for everything, you shouldn’t miss out on anything.
In our example at the top of the page, we said you had a 1972 Dodge Charger and a 2009 Nissan Sentra, both paid off. Now is when you must consider the market value of the car. What you may think a car is worth and its actual market value may differ.
For the Charger, depending on the engine and body type, you might see them selling for around $32,000 by collectors. However, according to Hagerty, an insurance company that specializes in classic cars, a 1972 Dodge Charger might be worth as much as $19,000. That’s quite a difference!
A 2009 Nissan Sentra, also depending on body and engine type, could sell for up $14,000 in some places. However, according to Kelly Blue Book, at a very good condition it’s valued at about $8,500.
So, which car do you choose? Well, not including all related incidentals, replacing a collapsed roof would on average cost you $12,000. The estimated market value of the Dodge was $19,000 and the estimated market value of the Nissan was $8,500. In this case, you should choose the Dodge as the car to use as collateral for your auto title loan.
Now, before you start worrying about weekend cruises in your imaginary classic car, one thing to remember is that you get to keep driving your car with an auto title loan. You keep and drive your car and the lender only affects the title and registration as lienholder until you pay the loan off. It’s just like when you’re making payments on any other type of auto loan.
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