It’s no secret that the US is in a tough financial spot right now. Inflation is sitting at a 40-year high and continuing to rise. On top of that, economists predict that we’re headed for a recession in 2023.
With today’s financial situation, it should come as no surprise that so many Americans struggle to make ends meet, let alone put money away for emergencies. If you’ve found yourself in a financial pinch, you’re probably considering whether a title pawn is right for you. Read on to learn what you need to know before you hand over your pink slip.
1. It’s a Short-Term Loan Product
The first thing you need to know about title pawns is that they are a short-term solution to your financial needs. They aren’t credit-based, which is why you hand over the title to your car when you sign for the loan.
Title loans come at a steep cost in terms of interest rates. The average interest rate on title loans in the US is about 25%, which means you’ll pay $250 in interest for every $1,000 you borrow.
Some people who take out title loans can’t afford to pay the interest, and they end up renewing the loan to keep from paying it off. Over time, they end up paying thousands of dollars to the title loan company. Make sure that you can afford to pay the interest once the loan is due, and try not to renew the loan at the end of the term.
2. Title Pawn Requirements
In order to qualify for a title loan, you need to have a car that is free and clear of any other liens or loans. That means you own your car outright and have proof of it from your state’s DMV. Some loan companies may make an exception if you have a significant amount of equity in your vehicle, but be sure to ask before going through the application process.
3. You Won’t Get the Full Car Value
Giving people title loans is a risky business for lenders, especially without running the credit of applicants.
For this reason, most title loan companies won’t give you the full value of your car for your loan. Expect most title pawn companies to offer you up to 50 percent of your car’s value as a loan. In most cases, that’s around $5,000 max.
That said, you don’t have to accept the full value of the loan. Only accept a loan that covers your short-term financial needs, and that you can pay back on time, including interest.
Is a Title Pawn Right for Your Financial Needs?
Today’s economy leaves little margin for error when it comes to your budget. If you’re in a bind, there aren’t a lot of options to help bridge the gap unless you have stellar credit. Utilizing a title pawn is a solid way to make ends meet, as long as you use it judiciously and repay it on time.
Are you looking for more great ways to hone your financial knowledge? Check out the rest of our blog for tons of great financial advice!