There are many ways on how to secure a loan; however, most of these methods take a lot of time before cash is received. For instance, securing a loan by mortgaging properties takes as much time as it needs to sell them at a public auction before cash is obtained. Also, securing a loan through credit financing takes a lot of time because financing companies need to make a thorough evaluation of the applicants’ credit worthiness first before their application is approved. In general, while securing loans is necessary, the procedure to do so takes a long time.
A person, however, has an alternative way to secure loans. These loans are called car title, or auto title loans.
Definition and Nature
A car title loan is a kind of secured loan wherein a person can obtain a certain amount of money using the title of his vehicle as collateral, or security, for the loan. This loan is similar to a real estate mortgage; the only difference is that the title for the vehicle is used.
Car title loans are usually short-term, meaning that they become payable within a period not longer than a year. Because they are short-term, they tend to be imposed with interest rates which are higher than those of any other types of loans. Car title loans are also easier to get because only the value and the condition of the vehicle are assessed. Examination of credit records, history, and scores are not done in these types of loans because the main consideration is the vehicle.
Car title loans are usually obtained by allowing the lender to put a lien or an interest on the title of their vehicle by annotating it on the title or by attaching a copy of the said lien onto the vehicle title. The lender then gives the money being asked in exchange for the vehicle title. The lender holds on to the title until the loan secured by the vehicle is repaid. If the loan is repaid, the lien or the interest is removed and the vehicle title is returned to its original owner. However, if the loan is unpaid, the lender gains the right to claim the vehicle and sell it to pay the loan.
One must know that car title loans do not allow the lender to use the borrower’s vehicle. Possession of the vehicle title only allows the lender to have an interest in the vehicle when the borrower defaults on his payments. It does not allow the lender to unilaterally get the vehicle and use it at his pleasure. He only gains the right to possess the vehicle when the borrower is unable to pay the loan.
Computation of Loanable Amount
The amount that can be borrowed through car title loans is dictated neither by the borrower nor the lender. It is determined by looking at the auction value or the market value of the vehicle. After determination, the lender will shell out money equivalent only to a percentage of such market value. For instance, a person who owns a car worth $20,000 can receive a car title loan for as much as 30% to 50% of the market value, or $6,000 to $10,000.
Car title loans in South Carolina are based on law. Section 37-3-413 of the South Carolina Code of Laws provides for the rules and regulations governing these types of loans. For instance, the law provides, among others, that a lender cannot lend money for an amount greater than the current market value of the vehicle, based on industry assessment standards. If the market value of the vehicle cannot be determined using these standards, the lender is allowed to use his best judgment to know the market value of the vehicle.
Car title loans are one of the alternative methods by which a person can easily obtain loans. Using his vehicle title, he can get cash within just a few minutes that he can use for his expenses.