Poor credit can definitely feel limiting, especially if you need cash instantly. Without a good credit score, it’s likely difficult to secure a loan, leaving you with very few options. But did you know you can use your vehicle as collateral and apply for an auto title loan? And not only that, but you can actually use auto title loans to help you rebuild your credit! Here’s everything you need to know.
What is a Title Loan?
A title loan is a short-term loan, similar to a payday loan. You don’t need to have good credit to secure a title loan – in fact, you can often get a loan without them ever checking your credit. It’s important to note, title loans usually still have a very high-interest rate and should be used with caution.
However, unlike a payday loan, which is unsecured, a title loan is secured. A secured loan means the lender will use your car or motorcycle as collateral for the loan. Of course, this means if you don’t pay back your loan balance, you risk having your vehicle repossessed, so it’s important to use caution when you are approved for a title loan.
How Auto Title Loans Can Rebuild Credit
If used correctly, auto title loans can help rebuild your credit. Just like any debt, if you make regular and on-time payments on your loan, your credit will start to slowly build.
On the other hand, if you are not sure you can make every monthly payment, this may not be the best option for you. Skipped or late payments can harm your credit score.
Different Types of Car Title Loans Options
In most cases, an auto title loan is a short term solution that you pay back after a month. Some, however, allow for more flexibility in terms of repayments. Indeed, there are even loan providers that allow you to pay back the money you borrowed, plus interest, in two years.
However, the ones with a short length are the best for rebuilding your credit history. This is also better because you will pay less interest.
Plan to Rebuild Your Credit
If you do want to use a car title loan to rebuild your credit, there are a few things to be aware of. First and foremost, always pay back the amount you borrowed on time. Don’t miss a single payment. Even better, pay your loan off early if you can!
Just like with any debt, create a repayment plan to stay on track with your payments. Make sure you have plenty in your savings account to ensure you can still pay, even during a tight month. Take a look at your budget and adjust accordingly so you can always make the loan payment.
And lastly, keep tabs on your credit score and credit report throughout the process. Slowly but surely, if you’re making regular payments you should start to see your credit score climb.