Are you looking for a loan and think you can use your vehicle as security to get it?

You’re not alone. Most people access these loans and most lenders are willing to loan you cash based on your car’s worth.

But how does this work in California?

Let’s dive in.

Typically, most lenders consider bank statements, credit score, and employment history before giving you a loan.

The lender uses these factors to establish your eligibility and the amount of money to lend you. Some loans require that you use equity in your property, such as your home, to secure the loan. In other words, you agree to use your house, vehicle, or other property as collateral against the loan.

Collateral refers to a specific property that the lender holds in exchange of the loan. If you are unable to pay off the loan, the lender may sell this item to recover the loan.

What Are Title Loans?

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In California, title loans refer to small loans where you are required to use a car’s title as collateral. California title loans have a minimum of $2,510.

While regular loans may have specific purposes, the cash from an auto title loan may have several uses. For example, you can use a California title loan to settle overdue bills, pay for family emergencies, or even as a down payment for a particular purchase.

Provided you keep paying for the loan as agreed, you can continue to drive the car while using the cash for a purpose that pleases you.

Requirements for California Title Loans

Since title loans are secured, the traditional loan requirements, such as credit score, don’t have a big impact on the terms and eligibility. Although lenders still consider these factors, they aren’t the major determinant when applying for a title loan.

So, what are the main qualifications of a title loan?

  • The cash you’re borrowing should be at least $2,510.
  • You should demonstrate how you’ll use the loan
  • The vehicle’s value must exceed the loan amount

How Title Loans Work in California

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Are you looking to get a title loan? Don’t do it before you know how it works as explained below:

California Title Loans Have Higher Interest Rates than Normal Car Loans

Often, auto title loans are short-term loans with a repayment period of 24 to 48 months and typical high interest rates.

These loans target individuals with low credit scores. As a result, their interest rates are higher compared to credit union or standard bank interest rates.

While a car title loan may have a monthly interest rate, its annual rate may be higher than that of conventional loans.

Getting a Loan Might Be Easier Than You Imagine

When it comes to applying for a title loan, what matters most is that you have a vehicle whose equity is enough for you to get the loan. It might an RV, truck, or SUV. If you own any of these, you can get a loan of $2,500 or more.

You Don’t Need to Be a High Income Earner

Traditional bank loans require that you earn a higher amount to qualify. To get a California car title loan, you need a minimum income of $1,200.

If your income is higher (and provided you’ve got equity), the chances of getting approved are high.

But please note that. You can’t qualify for this loan if you’re a debtor in an ongoing bankruptcy or plan to file for bankruptcy after you get the loan.

Your Vehicle Works as Your Loan’s Collateral

Are you interested in a California title loans? Well, your automobile will the collateral. Simply put, you’ll give the lender your vehicle’s title (hard copy).

In exchange, the lender will give you the agreed amount of loan. Presenting your vehicle as collateral for the loan protects the lender.

You Can Get More Money Based on Your Car’s Worth

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To determine how much you should get, most lenders look at your car’s worth and the equity in it. Generally, the vehicle should be worth $4,000 and above unless it’s eligible for a low vehicle value program.

There are several ways to raise your vehicle’s value, but the value is usually based on the Kelly Blue Book or similar programs. That said, you can get a maximum of $25,000 or even $50,000 depending on the situation.

If You Can’t Pay on Time, It Could Be Risky, But Don’t Panic

Like any other loan, applying for a California title loan comes with some risk. If you can’t settle the loan, you may lose the car to the lender, or attract fees and penalties.

If you encounter any problems, communicate with the lender on time so you can find a solution quickly and get caught up. Besides, be proactive and answer the lender’s calls, emails, or texts.

Ignoring communication can get things worse. It’s best to have a repayment plan ahead of getting the loan.

Remember, the lender is legally allowed to auction the car in a bid to recover the owed amount.

After Paying Off the Loan, You Get the Vehicle Back

Once you settle the loan, the lender removes the lien put on your vehicle, making it easy to get the title back. The process is straightforward and you should check out the agreement form from the lender for more details.

After the lender gives your title back, submit this paperwork to a suitable government agency so you can get another title. The California DMV will provide a new title that identifies you as the vehicle’s sole owner.