Banks approve more than 60% of collateral loan applications. The only tricky part is arranging to have the collateral in your possession when it’s time to close the deal. These loans are often used by people with items such as expensive jewelry, rare coins, or a car in fine condition that they can use as an alternative to cash. If you’re wondering, “what is a secured loan?” or “should I consider getting one?”, this post will answer any questions you have.
It’s hard to tell from the outside, but these loans are quite different from a standard loan. With a standard loan, the bank will advance you the full amount of your loan before you put up any property as collateral. It’s not one of those fast and in-and-out kinds of deals that banks can offer you. On a standard loan, the bank contracts to lend you the full amount of money needed to purchase property or to have money deposited in your bank account. In fact, most banks prefer that you have a minimum of 12 months’ worth of your current living expenses deposited into your bank account before approving the loan.
With secured loans, banks can’t lend you the full amount on the spot. In fact, they aren’t even willing to advance you any money at all unless they know that they’ll be able to recover their investment in full if the borrower should default on payments. Not only that, but with these loans you can’t use as much of your collateral as you want. The bank will only be willing to loan out the amount needed to cover the value of the collateral that they have in hand (the “collateral value”) when they lend you money. Anything beyond this is just wasted money, because the bank won’t be able to get it back if you default on payments.
However, there aren’t only banks which offer collateral loans but there are several private lenders and financial institutions like Canadian Cash Solutions that offer such loans in the form of car title loans. These are a unique type of loan which enables the borrower to borrow money within 24 hours even if they have a bad credit score.
What is a Car Title Loan?
You can borrow money from $500 to $4000 by using your car title as collateral. These loans are for a short period of time, commonly given for at least 4 years. Some companies may extend the term of your loan based on several factors. Car title loans are usually provided without checking the borrower’s credit score and job history. This means that these loans are accessible to all regardless of their credit score and involve far less formalities than the rest of the loans available to the borrowers.
How Does It Work?
The borrower must be the owner of the car and must have relevant documents to support their ownership.
Next, the borrower has to visit a loan provider’s website like Canadian Cash Solutions and fill in a loan application form with all the relevant information.
As soon as they submit the online application for such a collateral loan, they will have to get their vehicle inspected and documents verified. The documents include the following, but are not extensive,
- the clear title and proof of registration of the vehicle that is not more than 10 years old,
- the insurance policy which is collision deductible as well,
- proof of permanent residency in Canada,
- a valid Canadian License and any other relevant document as required.
Please note that these documents will not be kept with the lender but are only for verification motives.
Then, the lender will make a decision about your loan approval. If all the documents are well in shape and the information is satisfactory, most stakes remain in your favour.
Once you are approved, you are given the loan amount in cash or it is deposited in your bank account within 24 hours itself. This is after deciding upon the terms and conditions of the loan and its payments. Most commonly, the loan is returned in monthly installments, the amount of which is decided upon according to the borrower’s convenience.
For completion of the loan process, the title of the car and the spare keys are kept with the lending institution for the duration of the loan and the borrower continues to hold their car.
Car Title Loan Benefits
- There are several benefits of getting a collateral loan. You save money on processing fees since you don’t have to go through credit checks or long application forms. It is readily available for all individuals regardless of their income or credit score. This is because the loan is given entirely on the basis of the equity in the car that is kept as collateral and not the individual credibility of the borrower.
- The possession of the car stays with the borrower itself and so, they can continue driving it around to run chores and do their other work. This is uncommon in other types of secured loans because the collateral asset has to be kept with the traditional banking institutions.
- The borrower has the liberty to pay back the loan as soon as they have the appropriate funds available with them and they don’t have to wait for the loan duration to end and continue for such a period. There are no penalties that are charged for prepayment and that is a huge stress reliever to the borrowers. They can pay back the amount right when they have sufficient funds for it.
- The loan is considerably fast processing and cheap because of the absence of credit checks and complex application forms. The borrower gets the cash in their hand within 24 hours without hassles and the loan terms and conditions are conducive to their needs and preferences.