It is estimated that half of Canadians live paycheque to paycheque. With stagnant wages, a tight labour market, and record consumer debt levels, is it any wonder why households are struggling to keep their heads above water?
Despite media outlets casting a shadow over Canadians’ heads pertaining to their debts, you cannot blame the typical consumer for the ocean of red ink – it’s hard staying alive in this environment.
Credit cards, lines of credit, home equity lines of credit (HELOC), payday loans; there are so many ways Canadians can access the consumer market. But there is a new trend that is traveling up north from the United States: car title loans.
A car title loan is a secured loan where borrowers can use their automobile title as collateral in exchange for funds. Borrowers are required to permit lenders to place a lien on their car title and temporarily hand over a hard copy of the title.
When you desperately need the funds to replace your fridge, fix your washer, or pay for daycare, this is a viable option – as long as you repay the money.
Need the funds? Interested?
Here are five tips for a successful car title loan:
1. How Does It Work Anyway?
Before we proceed to the intricacies of a car title loan, you must be aware of the basics.
First, you will need to maintain some equity in your vehicle, whether it’s $3,000 or $20,000, and without any outstanding loans.
Second, loans can range from a few hundred dollars to thousands, but the loan amount will depend on the value or equity in your vehicle.
Third, no matter what, you will never get the full value of your car because lenders want to repossess and sell the automobile as quickly as possible should the borrower fail to repay the loan.
And that’s how it works.
2. Find Out What Cars Lenders Accept
As you navigate through the car title loan market, one important thing to keep a lookout for is to determine what automobiles the lenders will accept. On one hand, they likely won’t accept your 1988 Honda Civic. On the other, they might not take your vintage T-model Ford.
Also, the kilometres on your vehicle will be a factor. There will likely be restrictions on 100,000 kilometres or more.
However, for the most part, lenders will take a vast majority of the cars on the open road. That said, it would still be prudent to check the lists.
3. Check the Payment Options
When you speak with the various car title loan outfits, it would be a good idea to inquire about the repayment process. For instance, do you pay directly to the company or is it taken from your paycheque? Another good question to ask is how long the duration of the car title loan is – you’ll want the shortest loan possible to save you cash.
Remember, you don’t want any surprises.
4. Diligently Comb Through the TOS
A common mistake that nearly every consumer makes – not just borrowers – is that they fail to read through the terms and conditions of service, or user agreements. This is a terrible habit that we need to break because we can oftentimes get ourselves into trouble – financially and otherwise.
By doing this, you’ll know about late penalties, legal technicalities about these loans, what the interest rates are, and other important facets of your deal.
5. Do You Get to Keep the Car?
Finally, and perhaps the most important one, do you get to keep the car?
Ultimately, there are two options:
- A lender will require your vehicle to be impounded for the life of the loan.
- A lender will allow you to keep your car, but will install a tracking device.
The ladder is far more common than the former, but it’s still a good idea to find out.
It is true that we’re living beyond our means. But it’s also true that it is difficult to keep up with the cost of living. This is why so many are borrowing all the time: they can’t keep their heads above water. If you’re tapped out and you’ve exhausted all possibilities or you don’t want to use credit cards, then a car title loan may be the option for you.