Why Do You Need Insurance When Taking A Car Title Loan?
When you least expect it, you might get into a financial crunch and if you are looking for quick support and a solution, car title loans might be the best option. All that the lender needs is your clear vehicle title plus a few other ducuments and you will be written a check. The process normally takes less than an hour.
Your credit history and FICO scores are not considered so even with bad credit, you can avail the loan. It is good to discuss your requirements with the lender and that will ensure that you know the interest rate that you are paying on a daily basis. This will ensure that you are aware of the total amount that will be payable at the end of the month.
Although the lender will have the car in his or her name, you are free to drive it around and keep it as long as you keep paying the interest and principal. If you are unable to repay the loan within the specific time, most lenders would renew the loan and treat it as a new loan. Insurance is a must before the title loan is granted. In case you are in an accident wherein the car is damaged, while under the lender's title, the value of the vehicle will go down considerably. However, they can pursue legal measures to claim the complete repayment.
Most of the car title loan lenders will deny giving you a loan unless you have comprehensive insurance on the vehicle as they will completely lose the collateral if the car is totaled in the accident. Even if you do not take the full insurance plan, there has to be a minimum basic coverage that is essential as per state laws for being approved for the car title loan. Though each state that allows car title loans has different requirements, in some of the states, you need to have liability insurance covering property damage before you are eligible for the loans.
A positive factor of having proper insurance on your vehicle is that your monthly payment amount might be reduced by some title loan companies when you have high insurance on the vehicle. It is best to compare interest rates online before you sign the vehicle as collateral for a car title loan.