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Interest Rates on Car Title Loans – Is It Worth It?

By Fernando C | February 19 2020

The process of getting a  car title loan online is very simple, easy and straightforward. With less paperwork and less complex documentation, you can have the cash you need faster compared to other funding options like banks and credit unions.

Much like any other form of the loan system, an interest rate is involved. It is the responsibility of lenders to provide individuals with the loan they need. However, the loan business is a high-risk business venture, and like any other business, they too need to make some profit. This is why they charge borrowers to pay back the loan at an interest rate.

The title loan industry is governed and protected by state laws and legislation. These laws also vary from one state to another. When it comes to getting a cash advance using your car title, the law governs three major aspects; Let’s learn more about Interest Rates on Car Title Loans

  • the loan duration
  • the interest rate
  • possible service fees

Our concern in this article is the interest rate since the amount of cash you will be paying back depends on the interest.

Every lender wants to make the interest as favorable as possible for their clients and also to sustain their company in the loan business, however, this interest rate varies from one lender to another. It is also your responsibility to negotiate with your lender until you arrive at a loan term that will best fit your financial plan.

While some companies offer relatively lower interest rates, that of some other companies are ridiculously high. This is why it is paramount you understand all there is to know about car title loan interest rates and if getting a car title loan is worth it.

The more information you have about interest rates on car title loans, the more advantage you have, and the easier it becomes for you to proceed with getting a car title loan. First, let’s have a quick look at the way a car title loan works.

How Car Title Loans Work

A car title loan is a form of secured loan designed such that a borrower who owns a car receives a cash advance using the pink slip of the car as collateral. Some title loan companies still allow loans based on the equity in the car. This is called an auto equity loan. To get a car title loan, your car will be appraised and evaluated to determine its worth and resale value.

Unlike other funding options like pawn shops and collateral loans from banks, you get to keep possession of your car while you repay the loan. And a car, vehicle, truck, RV, or motorcycle with a clear title or enough equity can qualify you to collect a car title cash advance.

Car title loan providers are readily available as online lenders or physical offices. To apply, you will have to provide some requirements like; your car, car title or pink slip, a valid ID, insurance confirmation, and a few other minor documents. It is also important that you review the terms of the agreement with your lender and watch out for any form of hidden fees.

The fact that car title loans are quite expensive and last for a short period is no longer news. To understand the cost of getting a car title loan, you need to know how car title loans work and how their interest rates are calculated.

While some pessimists rant about all the cons associated with getting an auto title cash advance, suggesting that people stay away from these loan services because of the high-interest rates, with Car Title Loans California, you don’t have to worry.

The interest rate partly depends on the loan amount your car qualifies you to access. And we will get you the best rate you can find in California upon application. As you read further, you will have a glimpse of how we calculate your interest in a pink slip cash advance, then you can decide if it’s worth it or not.

Interest Rates on Auto Title Loans

When it comes to interest rates of auto title loans, what is legal and acceptable in one state or title loan firm may not be permitted in another. Typically, the state legislature sets the rate limits, but in some cases, title loan lenders are permitted to fix their interest rates.

But state laws are not the only deciding factors of what the interest rate of a title loan will be. The structure of your payment plan also affects how your interest rate will look like. Interest rates also get higher if you roll-over the loan into a new one.

Most lenders charge an interest rate of 25% monthly. This is equivalent to an APR (annual percentage rate) of 300%. It could also be a little higher depending on the policy of the lender. But since auto title loans are only for a short period, an APR might not be relevant. And an average interest rate of about 25% every month may not be too scary after all, considering the benefits.

How We Estimate Your Pink Slip Loan Interest Rate

Interest rates are usually calculated on a monthly or yearly basis. When it is every year, it’s called an annual interest rate (APR). There are other forms of interest rates like the simple interest rates and compound interest rates. The pink slip interest rate in some cases is estimated as compound interest, though most states legislation considers compounding as illegal.

According to a report by Bankrate, a typical title loan has an interest rate of about 25% over 30 days. And by implication, you will end up paying a large additional amount of interest if you don’t pay up your loan on time. Contrary to the description by Bankrate, title loan services offered by Car Title Loans California are structured differently.

Let’s say you need $5,000, and you need this cash urgently within 24 hours. A car title loan is the only option that provides you with quick cash for such emergencies. After your car appraisal and evaluation, you could receive this cash advance at an interest rate of say 26%. That is to say, the APR will be about 312%, and you will be paying the sum of $6,300 at the end of the loan period.

Usually, our loan services are designed to suit your financial plans. And based on negotiation, the loan period could last longer. With our car title loan calculator, you get a competitive and relatively lower rate than any other car title lender can offer. We also do not charge you any prepayment penalty, so you can pay us off at any time.

Do not let the general notion that car title loans are quite expensive to discourage you from applying for an auto title loan. Come to think of it, whether the interest rate is high or not, what other option do you have to raise the money urgently without any fuss?

With car title loans California, you get a much lower interest rate, compared to what other title loan agencies can offer. The better part of the deal is that with us, there are no hidden fees or charges. You only pay back whatever you borrow. Also, don’t hesitate to negotiate with us. Your convenience is what we protect.

We are always available to assist you in every way we can to ensure you enjoy the best car title loan experience.

Is an Auto Title Loan Worth it?

From the illustrative scenario above, paying an additional $1,300 to take care of a situation that needs urgent financial support is not that bad. The extra cash is nothing compared to the peace of mind you derive from saving yourself from that financial embarrassment.

Besides, if you try to weigh the two major options, which are; lower interest rate personal loans from banks and high-interest rate title loans, you will possibly end up choosing a car title loan instead because of the ease, simplicity, and speed of getting the cash you desperately need. The extra cash is only a small price to pay.

To get a clearer picture, think of a car title loan as a means of escaping financial embarrassments to attain financial buoyancy. As long as you can afford to completely and diligently pay off the loan, then it is reasonable that a car title loan is worth it.

Taking an auto title loan can only be worth it if you’re positive that you can pay off the loan, and pay it back on time. In other words, if you’re expecting some cash very soon but just need some cash to get by on, then taking a title loan is not a bad idea. In this case, getting a cash advance against the value of your car can be a lifesaver where you can hang onto till you get back on your feet.

The car title loan programs at Car Title Loan California permits you to pay off your loan at any time, with no additional fees. So rather than wait for a larger sum of money to come in while you have some unpaid bills piling up, then getting an auto title loan is a great short-term option for you.

Helpful Tips on Title Loan Interest Rates that gives you an advantage

So far, we have exposed you to how a car title loan is calculated and what the interest rate looks like. But there are still some other important things you must take note of when it comes to interest rates. Below are some helpful tips about interest rates that will give you an advantage, and save you from defaulting.

  1. Ensure you make your monthly payments on schedule. The longer you delay payments, the more you risk compounding the interest fee. Remember, each time you roll over, you pay more, at a higher interest rate than you initially began with. In the worst situation, you might find yourself on the verge of defaulting and losing your car through repossession.
  2. It’s smarter if you pay more each month to shorten the payment period. Remember there are no prepayment penalties. If you pay more each month, say double the amount, you will effectively shorten the payment period, and you will save some money in the long run.
  3. Do not fail to negotiate and discuss things over with your lender. This is your best chance of getting a deal that fits your situation.

Try to look for a way to shorten the payment time. If you are to pay $350 each month and you feel that your current financial strength will allow you to pay $400 monthly, go right ahead. You will find it beneficial in the future – cash-wise. You can summarize these tips in three steps:

  • Make sure the monthly payment cash is available
  • Find ways to generate some side cash to help you pay more each month
  • Shorten the payment time by paying more monthly

Now that you know about car title loans and the interest rates, plus the other amazing benefits you will get with Car Title Loans California, do not hesitate to approach us to get your application started. Call us today on 1-844-242-7467 or visit our website. We will be glad to assist you.