The companies that offer loans with the car title have multiplied in recent years.
After some products hide abusive interests and scams.
The posters that advertise it are distributed throughout the Spanish geography. They offer instant loans by putting the car as credit guarantee and with the possibility of continuing to circulate with it, without having to leave it in a deposit.
Asking for an immediate car title loan is a claim many people come to when they need liquidity quickly, a situation that has been repeated a lot in recent years. But some of the companies that offer these products include hidden clauses or apply exorbitant disguised interests.
Pawning a good to offer liquidity in exchange is an ancient practice, and in many cases, it can save you from some economic trouble. But it is also a type of loan that tends to have harsher conditions than a traditional loan with a bank. However, they are easier to obtain, since you have to present fewer guarantees of payment. In this case, the ownership of the car is sufficient for the lenders to consider that the money can be returned.
However, not all title loan companies that offer money with the car as guarantee work as lenders, but others choose a different formula that can lead to cheating. These are companies that buy the cars, leaving a repurchase option open. Also, between one moment and another rent the vehicle to the former owner, so you can continue, at least temporarily, circulating with him.
The loans with the car as collateral have, therefore, quite a few peculiarities and it is vital that the user is evident when he can request one and under what conditions, to avoid unpleasant consequences in the future.
When to ask for a loan with the car as collateral
For this type of loan, the vehicle is the guarantee for the company that the customer will pay the loan amount. Therefore, the fundamental requirement to apply for one of these loans is to be the owner of a car, although some entities allow doing so also with a motorcycle and even agricultural machinery.
These loans are intended for those people who cannot obtain financing through personal loans since they do not meet the requirements to access traditional banking services. They are usually people who do not have a regular source of income (such as a payroll or pension) and who believe they can afford the payments.
However, experts recommend never asking for a loan if it is not clear how it will be returned, especially outside banks, since the interests that are faced are usually higher.
The entities that grant a credit with the car as collateral work in the traditional way: the client obtains an amount and agrees to return it with a series of interests. In this case, the car works as a guarantee of payment, that is to say, in the fact that the instalments are not paid, it could be sold to obtain money with which to pay the debt.
However, the lender cannot keep the car directly under any circumstances. The law provides that the vehicle is sold at public auction, with a benefit for the owner. Once sold, I would have money to deal with the accumulated debt.
In this case, the usual formula is respected and the product sold is a loan. Therefore, to advertise it, the company must show the Annual Equivalent Rate (APR), which indicates the interests that the customer has to face.
It is very common that companies that offer this type of product demand very high interest since small amounts are lent for a short period. In this way, the calculation of the APR can be very striking, with values of more than 4,000%.