A car title loan is a type of short-term loan in which the borrower pledges their car as collateral. They are also known as auto title loans. In order to obtain a car title loan, the borrower must own their car free and clear. If the borrower fails to repay the loan, the lender takes ownership of the car and can sell it to recover their principal.
- Car title loans are short-term secured loans that use the borrower’s car as their collateral.
- They are associated with subprime lending, as they often involve high-interest rates and borrowers with poor credit ratings.
- Additional steps are sometimes required in order to reduce the lender’s risk, such as installing GPS trackers on the car to assist in potential repossession.
Understanding Car Title Loans
Car title loans are generally viewed as an example of subprime lending. This is because the loans are typically made to borrowers with lower incomes or relatively poor credit ratings, who are often unable to obtain other forms of financing, such as a personal line of credit (LOC). Continue reading