When you have a sudden bill that needs to be paid, a car that needs fixing, or maybe just some unexpected expenses, getting a loan can quickly become one of the most stressful situations as well as one of the most common. Most of us don’t tend to keep cash on hand in large amounts. Even those who do may not always have access to a bank that will let them borrow money. That’s where loans like a Wisconsin title loan come into play. With a title loan in Wisconsin, you don’t need to worry about being approved for additional credit, or about borrowing from someone else. The lender simply looks at your financial information and uses it to determine if you are able to repay the loan by charging your checking account directly on an occasional basis until it is paid back in full with interest as well as any fees associated with the loan itself. Although they may seem like they are best left only for emergencies, there are plenty of people who take out title loans because they know they can afford to repay them without causing too much damage. These loans can be advantageous in more ways than one and should be explored for anyone who finds themselves needing cash fast but doesn’t want to take out another credit card or use another type of unsecured personal loan.
What is a Title Loan in Wisconsin?
A Title Loan is a type of unsecured short-term loan that is obtained by the borrower’s use of their vehicle as collateral. The lender obtains a copy of your car’s title (presented as collateral) and uses that as collateral to access your checking account and take out a line of credit between $1,000 and $50,000. The line of credit is then paid back to the lender in small installments until the loan is paid off. Because the lender doesn’t need to prove that you have the ability to repay the loan, there are typically higher interest rates associated with this form of loan. The lender does not need to be concerned with your ability to repay the loan because they just look at your financial information (your account information) and then take that information and use it to determine if you are able to repay the loan. The interest is typically compounded and then paid back from the proceeds of your next payment.
When Should You Take Out a Title Loan?
Getting Wisconsin auto title loans can be useful if you have unexpected expenses that will require immediate cash and you don’t have time to wait for a check to clear. This could include an unexpected car repair, a medical bill, or an emergency expense like a job loss or an accident.
Drawbacks of taking out a Title Loan
Higher interest rate than unsecured loans: With a title loan, you are borrowing money from a lender at a fixed rate of interest. They will charge you interest on the amount borrowed.
Your vehicle is as good as gone: When you take out a title loan, your car is collateral for the loan. If you don’t pay back the loan, the lender will have the right to take your car. This is a serious drawback to the loan.
Could damage your credit: If you take out a title loan and don’t pay it back, it will appear on your credit report as a default. This may damage your credit score.
May take a long time to pay off: If you take out a title loan and then have to pay interest on that loan, it could take a long time to pay off.
Could damage your vehicle: A vehicle cannot handle the wear and tear of constant payments. If you keep falling behind on payments, your car could be damaged or even get repossessed. This is a serious drawback to the loan.
Must make payments back to the lender: After you make your first payment towards the loan, you must continue to make payments back to the lender. This slows down the process of paying off the loan.
May damage your credit: If you don’t pay back a title loan, it will be reported to all three major credit bureaus. This may damage your credit score.
May be illegal: Title loans are regulated by Wisconsin state law, but the terms and conditions may be illegal in other states. You should check with a lawyer before signing any documents related to a title loan.
May have hidden costs: Even if the loan is advertised as a simple $1,000 loan, there may be other costs such as late fees, interest, and collection costs. Be sure to read the fine print before signing any documents.
Repaying a loan with a loan: While they are legal in Wisconsin, a lot of people don’t realize that taking out a title loan and then repaying the loan with the loan itself is illegal.
Pros of getting a Title Loan
- Convenient and quick cash: With a title loan, you can get cash quickly without having to put up your car as collateral. There are many who use a title loan as a bridge loan until they can get approved for a regular loan, so they don’t have to pay interest on a large amount of cash.
- Flexibility: Unlike a cash advance from a bank or credit card, you can use a title loan for any purpose that does not violate state or federal law.
- You are the one who makes the payments: You are the one who must repay the loan, so it is in your best interest to repay it as quickly as possible.
- Can help you pay off other loans: Sometimes, a large loan will be used to pay off another large loan, such as when someone borrows $10,000 to pay off a $20,000 credit card bill. If you can repay the title loan quickly enough, you may be able to repay it back to the lender, who will be happy to wipe the $10,000 credit card debt off their books.
- Can help you improve your credit score: If you pay back the loan on time and in full, it helps improve your credit score.
- Can be helpful in securing financing for your next purchase: If you take out a title loan, it could help you get approved for a loan to purchase a car or other large purchase.
- Can help you get out of a financial jam: If you find yourself in a bind and need quick cash, a title loan could be a helpful option for you.
- You could make some money: If you are approved for a title loan and borrow $1,000, you could make $10,000 in interest before paying it back.
Final word: Should you take out a Title Loan?
There are many benefits to getting a title loan, but they come with a few drawbacks as well. If you find yourself in a situation where you need cash quickly, but you don’t want to risk damaging your credit score by taking out a loan from a traditional lender, a Wisconsin title loans may be the best option for you.
