The Car Title Loan Process Outlined

A cart title loan is a secured debt against the equity you have in your automobile. This is not a car loan, which is a loan used to purchase a vehicle. Instead, a car title loan is like a home equity loan, only it turns the equity you have in your vehicle (rather than in your home) to immediate cash by reconverting it to debt. The process is rather simple if your lender offers car title loans. 


Do not forget the first important step of budgeting for the loan. The total debts you take on, including your current car loan, student debts, mortgage or rent payments and other fixed expenses, should not exceed 50 percent of your income. If taking the new loan will put you over the edge, you should reconsider whether you can reasonably take on additional debt at this time.


Once you have decided how much additional debt you can afford, you can apply for a loan not exceeding the total amount of equity you have in the car. Your application will gather information on your credit, income and other debts. Because you are using your car to secure your loan, you will typically find your lender may have lower credit requirements for this option over an unsecured option. 


Once you have applied, the loan goes through the processing phase. A lending agent considers whether you are qualified for the loan you have applied for. The agent will verify that all information provided on your application is accurate, and the agent will run a full credit check. You will likely be charged for this credit check and other paperwork even if you do not move forward with the loan.


Origination is a term used to describe the process from applying for a loan straight through to the decision a lender makes to disburse you funds. Origination is not actually a separate part of the process. However, the date of origination of your loan will be the date the lender approves your loan. The date of origination could come into play later on in the loan since it is technically the start date for the financing. Further, if you ever modify, refinance or otherwise change your loan terms in the future, the date of origination can be important.

Disbursal or Denial

Once the entire origination process is complete, the lender will either deny or agree to fund your loan. It is possible the lender will agree to fund your loan but set a lower limit. This means the lender is quoting a lower loan-to-value ratio on the equity of your car than you anticipated. Whether the lender funds your full request or a portion of your request, the lender will disburse the funding in the method of your choice. For example, you may have opted for a cash advance. In this case, at the time your loan is disbursed, your lender will either transfer funds directly into a bank account of your choice or provide you with a check to cash. These terms are set in your loan contract.

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