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The housing and debt crisis of the late 2000s left the American economy weaker than it had been in years prior. Thousands of businesses, including banks, failed leaving many wondering how they would borrow should they need to do so. In recent years, the car title loan has become more popular as an alternative to the conventional types of loans offered by traditional financial institutions. Like any loan product, there are pros and cons to obtaining a car title loan. Let’s take a look.
Obtaining a car title loan is pretty easy. To qualify, a borrower needs to own a vehicle that is paid off and has a title free of any liens. If so, the borrower can apply to a car title loan company such as Embassy Loans of Florida. The application takes just a few minutes to fill out and then the lender will begin processing the loan. Embassy Loans, for example, will verify a person’s identity and residency and make sure that the title and the vehicle match.
Since the loan is secured by the vehicle, there is no need to run a credit history on a borrower. Some lenders may still do so, but credit is not the primary reason for approving or denying a car title loan. Borrowers with less than outstanding credit can still use a car title loan to borrow money.
Once the loan is approved, the lender will possess the title, but the borrower keeps and uses the car. Once the loan is paid off, the borrower will be able to get the title back.
A car title loan is a little more risky than a traditional bank loan and, as a result, comes with a higher price, or interest rate. Borrowers are encouraged to repay their loans as quickly as possible to save on interest payments.
Should a borrower fail to meet the repayment terms of the loan, the lender can take possession of the vehicle. The lender will then try to sell the vehicle to recover some or all of its losses.
An auto equity loan, sometimes known as a car title loan or a car equity loan, is a type of loan that allows you to borrow money by using your vehicle as collateral. The loan is secured by your vehicle, meaning you agree to use the equity in your car to back the loan.
An unsecured personal loan is a loan that does not require collateral. Funds are provided based on your credit worthiness and your ability to repay.
The credit builder program is designed to help individuals establish or improve their credit score with the primary purpose of building a positive credit history through regular payments.
Embassy Loans can only extend one loan at a time and it’s advisable to start with one and focus on making payments in a timely manner to prevent default.
Missing a payment can have negative consequences, including late fees, a drop in your credit score, and potential default on the loan. Consistent, on-time payments are crucial to benefit from the program.