Getting an auto title loan without a job can be done. However, lenders still require a source of income for repayment despite having the car as collateral.
Loans are not only for those who still have a job in this challenging economy. Many people who have hit hard times are surviving on Social Security or unemployment benefits. Despite barely surviving on these social safety nets, some may need to borrow money. An auto title loan is one of the few ways to borrow money with no job as an unemployed person.
Auto Title Loan Collateral
An auto title loan uses a car as collateral in case the loan is not repaid. It would appear that there is no risk to the lender even if the borrower has no job since the car can be sold in order to repay the loan. However, there are many cases where the sale falls short of repaying the entire loan. For example, what happens to the car’s value if it suffers a transmission failure after warranty expiration which typically costs several thousand dollars to fix? The car may not be worth enough to pay the loan after an auto auction.
Although the amount loaned varies from one lender to the next, most will not loan out more than 40% of the wholesale value of the car. Since all auto title lenders require a clear title or substantial equity in a car, most vehicles will be several years old when a title loan is needed. By then, the value of the car will probably be significantly reduced. This means borrowers should not expect a huge windfall when asking a lender how much they can borrow.
Auto insurance requirements for auto title loans vary. Depending on the amount, the lender may require both collision and comprehensive auto insurance coverage. This may increase the costs of borrowing if previous insurance was only for minimum liability.
Acceptable Income Sources for Repayment of Auto Title Loans
Although auto title loan lenders require a source of income for repayment, they do not care where it comes from as long as it’s regularly occurring, consistent, and stable. The good news is that the income does not have to be a job. Some good, stable sources of income for repayment of an auto title loan acceptable to many auto title lenders include:
- Paycheck from a job
- Monthly retirement pension payment
- Social Security retirement benefit payment
- Social Security disability benefit payment
- Unemployment insurance benefit payment
- Insurance annuity payment
- Proof of stable income from self employment (Eg. tax returns, bank statements, Paypal statements, etc.)
Not all auto title loan lenders accept all of these income options. It may require searching multiple lenders before finding one that will accept a particular source of income. Keep in mind that a bad credit report or no credit history rarely causes an auto title loan application denial. All that usually matters is the car and source of income.
With the tight credit environment in the economy, even employed workers are looking at auto title loans as a viable means of borrowing money when banks are turning down loans left and right. However, keep in mind that auto title loan interest and fees are generally very high. If a payment is missed beyond the grace period, there is a significant chance that the car will be repossessed shortly, which will make it much more difficult to get around town. Because of this, borrowers should look to traditional sources of credit including personal loans and credit cards before looking at auto title loans.
Reference:
Center for Responsible Lending. “Auto Title Loans and the Law.” 2009.
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Tags: Auto Title, Auto Title Loan, Job, Title Loan
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