Due to the global financial crisis, many banks have tightened up their lending criteria. As a result, access to traditional unsecured credit has become harder than ever.
Credit cards are harder to come by, and many credit card companies have even cut the credit limits for existing account holders. Personal unsecured loans, which have traditionally been hard to get, are virtually extinct.
Moreover, home equity loans, which many Americans used to finance home improvement and the purchase of consumer goods, are hard to come by, since house prices have dropped significantly.
So what are your options if you have a need for quick cash to help you through a difficult time?
Most people are aware that there are a vast number of companies catering to consumers who don't have easy access to easy credit anymore. This includes check cashing stores, pawn shops and online payday lenders. These companies offer access to fast cash with limited hassle.
However, the use of their products comes with a hefty sticker price. Often times, the loan amounts available through these companies are not high enough. Moreover, depending on the state, the fees and interest charged for short term cash can be higher than 200% on an annual basis.
In addition, these short term cash loans usually have to be paid back within 30 or 60 days, which often times results in the consumer taking out another loan, tagging on more fees and interest.
Many consumers are not aware that they may have access to the cash they need, if they have a paid off vehicle that can be used as a security for an installment loan.
There are 2 types of loans that customers can get using their paid off vehicle:
• Traditional title loans: these are usually short term (up to 30 day) loans with relatively high fees
• Auto equity loans: these are installment loans that are structured like a real car loan, with monthly payments that don't change
When using your car as a security to get a loan, it is important to consider the following:
• Will I be able to pay back the loan / will I be able to make the monthly payments
• Are there any fees to apply
• Will I have to hand over my second set of keys to my car
• How much will I be charged in interest and fees
• Will my payment history be reported to the credit bureaus, giving me a chance to build credit history
• What vehicle makes / vehicle years does the lender accept
Once you take these factors into consideration, you will be able to make the right decision about using your car to get the cash you need, and choosing the best lender for your cash needs.
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