How To Compare Title Loan Companies

Title loans use the vehicle of the borrower as collateral

. These quick, simple loans usually range from $100 to $2,000 and may close in as little as fifteen minutes because no painstaking credit and background checks are necessary. Getting a title loan is easy, even for borrowers with terrible credit; it's important to understand, however, that not all underwriters are the same. Borrowers should investigate several possible lenders before signing on the dotted line. Not sure how to compare title loan providers? Read on to find out.

The Crucial Triad

The most important factors to consider while investigating title loan companies are the principal cap, interest rate and length of the repayment period. First, the most important question of all: how much money will the bank offer? Banks usually loan between 30% and 50% of the car's current resale value as listed in the Kelley Blue Book. Some may exceed 50%, but this is exceedingly rare. Interest is another crucial factor to consider. Of course, borrowers want to pay as little interest as possible; although title loans usually have higher interest compared to other types of loans, there can be substantial differences in the rates charged by different companies. Shopping around often saves borrowers hundreds or thousands of dollars. The length of a title loan repayment period has a strong influence on the amount of each monthly payment; longer terms may have lower principal repayments but higher interest rates, meaning that the borrower actually spends more money over the life of the loan.

The Human Factor

During the research phase, it's prudent to log details on a spreadsheet. This keeps everything neat, organized and easy to read. Comparisons shouldn't just involve money, however. Research each company on the Internet and seek out borrower reviews. Will this company be easy to work with? Will this company treat me in an ethical manner? Have they frequently been accused of sneaking things into loan contracts or otherwise compromising good faith? These are essential questions for all loans, and are particularly relevant here because many individuals who take out a title loan do so because their credit rating is so poor that they're ineligible for other kinds of loans.

From the Abundance of the Heart, the Mouth Speaks

Don't underestimate the value of "word of mouth" promotion, and ask family members, friends and co-workers for recommendations. Third-party Internet review sites are another excellent option; make doubly sure that the site is NOT hosted by an insurance company, however, because that conflict of interest eliminates the site as an information source. If time permits, it's also wise to schedule appointments with several prospective loan companies, either in person or via telephone. Consider the content of the information they provide, but also listen to their tone of voice and general demeanor. A loan officer who quickly becomes defensive when asked for references or who cannot (will not?) divulge specific financial information has a reason for being secretive. An underwriter with nothing to hide will be happy to list some references and meet with borrowers in person to address their concerns and make them an offer. These simple steps don't take much time, and can save the borrower a great deal of heartache and stress during repayment.

by: John Smithes

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