You have often heard of the terms ‘auto loans’ and ‘car title loans’ and could be wondering what is the difference. In order to understand the difference between car title loans and auto loans it is essential to know how they work. Car loans or auto loans are designed to help you finance a vehicle you want to buy. When you find a car from a dealer or car seller, and negotiate the fairest price that you can buy it, then you can get what is known as a buyer order.
When you agree to purchase that vehicle at that particular amount you have discussed with the seller, you are written a buyer order. This buyer order is actually an agreement that says you have agreed to pay the amount in exchange for the automobile. The buyer order gives details that describe the vehicle and provides the lender with information pertaining to the VIN as well as the title.
The lender then looks at the buyers order and approves the sale thereby writing a check that is payable to the seller. On the other hand, car title loans are credit facilities that are offered against a vehicle you already own. They are not necessarily for buying a car but they could be for other financial needs.
The structure of lending these two credit facilities is quite different. The auto loans attract lower interest rates though it depends on your credit history and score. On the other hand, car title loans are perceived high risk loans because they attractive higher interest rates. One big advantage with car title loans is that they allow you to get cash when you need it extremely quickly. They can be processed as soon as within a day or two.
The process is simple and only entails the lender looking at your vehicle to ensure it is worthy the amount you would like to borrow. Anyone who owns a car could get the auto title loan. Usually, there are no background or credit checks that are involved. These are some of the reasons, which make these loans attract high interest rates.
The title of your car acts as the collateral for the loans. The car title loans are ideal for those who have bad credit and cannot be approved of an unsecured loan. A bank will most likely not grant you money if you have bad credit and do not have a security to give as collateral. However, if you have a car, the title loan could get you want you want.
One problem with car title loans is that they can attract very high interest rates despite the fact that you are offering the title of car against the credit facility. The interest rates can range from somewhere between 84 percent to about 300 percent or even more. Consumers are advised not to be fooled by the considerably small and easy initial fees, because many people end up getting in a cycle of debt, which risks them from losing their vehicle or other assets.
In addition, car title loans are basically short term emergency loans and you will probably be required to repay the loan within 30 days. With auto loans, although the interest rates will vary according to the credit score, you can get the loan at an interest rate of as low as 7 percent.
Besides, the car loans are long term and you could repay them in a couple of years. The loans interest rates may also vary depending on whether you are purchasing a new car or a used car. People with bad credit score can also get these auto loans but the interest can be as high as between 22 to 30 percent. If you are in bad credit and want to take as long as possible to pay the auto loans, you can consider the best car loans to be as high as between 12 percent and 14 percent of interest rates.