How to Escape a High Interest Title Loan

March 18, 2012 by  Filed under: Loans 

Credit can be hard to come by in this economy. So if you own your vehicle, you can use it as collateral for a short-term title loan. The difficulty comes in finding a lender that will offer you a loan at a low interest rate. Title loan companies and title pawn companies are notorious for charging high interest rates to consumers with limited credit options. For this reason, many people find themselves in high interest title loans with little hope of escape.

The good news is that there are lenders who specialize in paying off these high interest loans. They essentially refinance the title loan, meaning they pay off a borrower’s balance at one financial institution and issue them a new loan at a lower rate. When applying for a title loan refinance, here are a few things your new lender will need to know:

  • Vehicle Make & Model – Lenders need to know if the collateral offered for the loan is worth enough to cover the unpaid balance in the unfortunate event that a borrower is unable to repay.
  • Vehicle Year & Mileage – This information is important because it enables lenders to know the true value of a vehicle. An older vehicle with fewer miles may still serve as good collateral – depending on your lender’s policies. Whereas a late-model vehicle with high mileage may not be worth as much. However, each lender has their own standards, so check around.
  • Your Employment Status & Monthly Income – Loan companies want to be sure borrowers have the means to repay the loan. Therefore, a steady income is a requirement for securing a title loan refinance. Some lenders may include alimony, retirement income and SSI as a source of income, so be sure to verify this with your lender.
  • Current Loan Balance – In order to refinance, a lender must know the remaining balance of your current loan. This information allows them to determine eligibility for the refinance, and upon approval, send the full payoff amount to the previous lender.

Before you sign any loan documents, be sure you have a full understanding of the terms and conditions of the refinance. It is of no benefit to you to refinance your title loan at a higher rate of interest. So be sure you know the interest rate for the loan, as well as the term of the loan. The term tells you how long you will pay on the loan before it is paid off. Most title loan refinance terms last anywhere from 12 – 24 months, depending on the loan amount.

Sarah has worked in the financial industry for many years, specializing in loans to people with limited credit options. Currently, Sarah writes for a variety of websites, one of which is a loan company specializing in title loan refinance.

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