Unsecured loans let you borrow money without risking any possessions as collateral. But they can be harder to qualify for and come with higher rates and lower loan amounts. Car owners who don't want to deal with these issues can use their title as collateral to get a title pawn loan. This article will explain how title pawns work, then discuss how they differ from unsecured loans to help you decide if a title pawn is right for you.
How do title pawns work?
A title pawn lets you use your car title as collateral for a loan if you have no liens on the vehicle, meaning you own it outright. They often come with less strict credit score requirements and can get you the funds you need as soon as the same day you apply.
To get a title pawn, you'll first have the lender look over and appraise your car. They will then offer you a loan amount and terms based on a percentage of the vehicle's appraised value. If you accept the terms, you can leave with cash in hand that day. The loan will usually be due within a few months, and you can continue driving your car while the loan is outstanding.
Differences between title pawns and unsecured loans
Title pawns and secured loans both let you borrow money, but title pawns have some key differences that could make them the better option for some people:
Title pawns require collateral
Title pawns require you to put down your vehicle title as collateral. This can help you get a better interest rate. But keep in mind that it also means your vehicle is at risk. If you default on the loan, your lender may be able to seize your vehicle to cover the loan. So, it's vital to ensure you can repay a title pawn before getting one.
You may qualify for a larger loan amount with a title pawn
A secured loan like a title pawn reduces the lender's risk. As a result, they may be willing to give you a larger loan amount than on an unsecured loan. That said, your exact loan amount will depend on your vehicle. A more valuable vehicle may qualify you for a larger loan than a less valuable one.
The bottom line
Both title pawns and unsecured loans can be great options for getting funds fast, but it depends on the borrower and their circumstances. Unsecured loans can work well for borrowers who don't want to use collateral to get a loan.
But vehicle owners who want to get larger loan amounts might consider a title pawn instead. In both cases, shop around and research multiple lenders before moving forward with a loan. This will help you get great terms and find a lender that's easy to work with.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
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