Often, when people need a loan or line of credit to start a new venture like a small business, they look to their local lending institution. While this viable loan option, it isn’t the only one.
The savvy entrepreneur looks at all types of funding, especially if his/ her credit is an issue. There are credit card companies and even banks that will help this individual. However, one of the simplest sources of lending may be just around the corner at the local title loan office.
How Title Loans Work
Essentially, a couple of different types of loans exist, the signature loan and the collateral loan. The signature loan is unsecured with physical collateral. That is to say that your credit history is solid enough that lenders will give you money based on that.
The other kind of loan, the collateral loan, has some sort of security behind it. Technically, your mortgage is a collateral loan in that you have a house to back up the money you’re borrowing. Car title loans are also collateral loans. You are offering up your car as collateral for your loan.
The Advantages of a Title Loan
Because they are secured loans, title loans don’t require you to have good credit in order to borrow money. You also don’t have to wait very long to find out if your loan has been approved. Much of the time, it’s the same day.
While the introduction to this post suggested that a person could use a title loan to start a business, you can actually use these loans for a number of purposes. This has to do with the nature of the loan, meaning that because you are not relying on your credit history, but rather your collateral, you often don’t need to explain how you’d like to use the cash. If you have a personal reason for needing the money – say that you need to catch up some payments – you can use the money for that, also.
Jumpstart Your Credit
Your credit can take a hit after major life events like divorce. According to the Money Crashers website, getting an installment loan is one of the ways you can rebuild your credit. While many car title loans are short-term loans, some require the borrower to pay the loan off over a longer period of time.
If you’ve taken out a title loan and are able to pay it off on time with no late penalties, you can rebuild your credit. But that’s not the only reason to be optimistic. Once you pay it off and continue to pay off other debts, your chances of getting different types of credit – credit cards, signature loans, mortgages, etc. – increase.
Consolidation
According to Nolo.com, debt consolidation is where you take out a loan with the intention of paying off a lot of smaller debts. By doing this, you have one payment a month instead of four or five. Car title loans can be used for this purpose.
Doing this is helpful on multiple fronts. From just a psychological standpoint, you may feel better. However, you also have the advantage from a credit option. Those bills will be paid off, giving your credit a lift. And you’re paying off a loan over time, giving yourself another lift in the credit department. If done right, it can be a very smart move from a money standpoint.
Takeaways
Title loans count among the most promising ways to borrow in 2017. They give you quick cash when you need it. They also allow you to repair broken credit. Title loans can also help you get ahead by helping you finance a business or by allowing