Do you need a source of quick cash but have a bad credit score? If so, a car title loan might be an option you should think about.
However, car titles usually have many more requirements for borrowers than smaller loans would. One such requirement might be an income verification, which is basically the lender making sure you have a source of income that will help you be able to pay the title loan off. But what if you don’t have a source of income? Can you still get car title loans with no income verification? Keep reading and you’ll find out!
What is a Car Title Loan?
Before we get into car title loans with no income verification, it is important to understand what a car title loan actually is.
A car title loan is a loan that requires you, the borrower, to use your car as collateral for a loan. Two main types of loans exist: secured loans and unsecured loans. Unsecured loans are loans that do not require the borrower to put up collateral for the loan. These loans are riskier for lenders and are less risky for borrowers.
On the other hand, secured loans require the borrower to put something up for collateral. Common secured loans are car loans and payday loans no credit check Tennessee mortgages, which require the borrower to use their car or their house as collateral. If they fail to pay back the loan, the lender can take whatever the borrower put up for collateral, like a car or a house. As you can see, secured loans are riskier for borrowers and are less risky for lenders.
A title loan is a secured loan. In a title loan, you temporarily give up the title of your car in exchange for the cash from the loan. When the loan is paid off, you get your car title back. If you fail to pay back your car title loan, a traditional lender has the ability to legally take the title of your car from you, which means you lose your car. Unfortunately, these loans are pretty difficult to pay back, which causes many people to have to forfeit their cars.
Title loans are generally used by people with poor credit scores. Individuals with better credit scores are often regarded as “safer” investments by lenders while individuals with bad credit scores are regarded as “risky.” To let someone with a bad credit score get a loan, a lender might require the borrower to use their car title as collateral for the loan.
Risks of Car Title Loans
As you might be able to see, car title loans are extremely risky for borrowers. Cars are often extremely important parts of our lives. We rely on them to go to work, get groceries, and to get just about anywhere. If you rely on your car, having to live without one might be an extremely difficult and burdensome thing.
Car title loans may not give you more cash than your car is worth, but they still might require you to give up your car title. Think about it; you get a $2,500 car title loan but your car is worth $5,000. If you fail to pay back your loan, you not only lose your car but you’ve forfeited about $2,500 in value as well.
Oftentimes, car title loans are expensive and must be paid back in a relatively short period of time. This makes paying these loans very difficult. If you can’t pay back one of these difficult loans, you will lose your car. As you can see, car title loans can be extremely dangerous and problematic and can pose a huge risk for any borrower that wants to get one.