Title loans are short-term loans with high interest that require an individual’s car as collateral to borrow money. Individuals who do not have good credit and need to take out loans may be looking for places that will accept a low credit score. These people may refinance a title loan online by transferring the original loan’s remaining balance to a new lender. An individual signs a new contract with different terms.
They choose an agreement that is fairer, flexible, and personalized to suit their situation. Although funding a title loan again can be time-consuming when researching the various available loan options, it is generally not difficult. Depending on the terms one receives, the time invested could mean saving thousands.
How Title Loan Works
An individual can begin to refinance their car title loan immediately if they meet the following requirements :
- One should have their title and vehicle that they want to refinance
- Present the year, model, make, mileage and the condition information of the vehicle
- Provide their state or federally issued identification to prove their identity
- They should be ready to bring their car to a specific location for testing and verification
- Provide the name and contact information of the current lender
Reasons Borrowers Prefer to Refinance Their Title Loan
The following are some of the many reasons why people may choose a car title loan refinance:
To Receive Lower Interest Rates Every lender uses their own process to select the interest rates; therefore, the lenders’ rates can vary. If one does not do their research, they can pick a lender with higher rates than the average interest rates.
If a person does not have an excellent credit score when they first apply, they may receive high-interest rates. If they work hard to improve their credit, they may be able to get a better rate.
Lower Payment Rates
The monthly payments are usually based on the loan’s principal amount; if an individual has borrowed a large amount, the initial agreement will include a high monthly payment rate. However, after they have had the loan for some time, the principal will be lower. A borrower can use the lower balance to qualify for the lower monthly payments when they refinance their title loan. It is essential to understand that there are limitations. At a certain balance, refinancing becomes impossible as minimum amounts vary from one state to another.
To Avoid a Default
Refinancing one’s title loan is a good option if the current loan is unstable for some reason. Refinancing may provide much-needed relief if the borrower is paying more due to penalties. An individual may change the terms causing their problems like the payment methods and dates; even minor adjustments can make it easier for one to pay off their loans.
To Benefit From Better Customer Service
A borrower may not have problems paying back their title loans but may be displeased with their lender because of poor customer service. Refinancing could be the solution when one cannot receive the help they need from their current lender.
Pros of Title Loans
- Most title loans do not require a credit check; this is good if one has exhausted all available avenues and does not have excellent credit to qualify for traditional loans.
- Quick approval and processing of funds because there is no credit check; it takes a few minutes for the application to be reviewed.
Cons of Title Loans
- They can become debt burdens to borrowers because they continue to take out new loans to repay the old ones.
- Title loans require repayment in 15 to 30 days, while traditional loans need six to three years.
How to Refinance the Title Loan
- Review your current contract
- Review your credit score
- Explore the options
- Determine how much you need
- Apply for the refinancing of the title loan
In sum, refinancing allows a borrower to extend the repayment terms of their existing title loan, hence reducing their monthly payments. The refinance means the borrower will usually have to pay off more interest on their loan’s life, but it may help free up some monthly cash to get them through the difficult patch.
The main challenge with title loans is if the borrower does not pay their loan on time, they may lose their car because it serves as the collateral. If one chooses to take out the loan, they should make sure they pay on time so that they do not lose their asset.