Eight Cheap Car Title Loan Alternatives to Raise Cash
By Space Coast Daily // September 17, 2019
Financial emergencies can come calling at any time. In fact, they can appear when you’re strapped for cash and while there are several ways to raise cash fast, it’s important to understand how each method works before signing on the dotted line.
One of the common methods used by borrowers during emergencies is taking out a car title loan. However, this may not be the best method after all. Car title loans, also known as pink slip loans are loans that require the borrower to put up their car as collateral.
The loan amount available to the borrower will depend on the car’s condition and current market value. Often, lenders will issue half of the car’s value. The interest rates are the most terrifying, with traditional lenders charging 300% to 400% and others going as high 650%.
With such high interest rates and other fees, it’s only fair that you know of other alternatives to raise cash.
Friends and Family
Close friends and relatives form the first line of defense against a cash emergency before seeking alternative sources of funding. The cash can come in the form of a gift or a conventional loan if the lender feels more comfortable that way.
Keep in mind, a conventional loan will come with a structured repayment plan, an interest rate, and a signed agreement to officiate the deal. In some instances, the borrower will put up collateral to ease the lender’s nerves.
However, the main difference between this kind on loan and a conventional one is the interest rate. With conventional loans, borrowers can expect interest rates in the triple-digit range. It gets even worse for a borrower with a bad credit score. On the other hand, a loan from a friend or family member can be modest – single-digit or zero.
Get a Short-Term Loan
Car title loans are known for triple-digit interest rates, something that won’t go well with your pocket. Nevertheless, you can avoid this by applying for a conventional loan at traditional lenders such as banks and credit unions.
Exhausting all conventional loan options is a great move before settling on a title loan. In fact, the cheapest title loan is still more expensive than the most expensive bank loan. In some cases, borrowers with poor credit can put up collateral and still access a loan using the bank’s interest rates.
Borrow from Peer-to-Peer Lenders
Peer-to-peer lending is one of the revolutionary forms of alternative lending. With this method, borrowers put out a request for a loan on a peer-to-peer lending site such as Lending Club. Afterward, investors will bid to fund the loan, offering their best interest rates.
The borrower will then choose from the pack who they wish to work with. As far as interest rates go, borrowers with less than stellar credit can afford loans from these sites, with the maximum APR topping at 30%. This includes the origination fees, which is about 5% of the loan amount.
The advantage of this method compared to a car title loan is the minimum amount for the former can be higher than that of the latter. This exposes a glaring danger and that is you may end up borrowing more than what you need.
Another disadvantage is the inability to build a credit history with a specific lender. However, borrowers will be happy to know that there are no early payment fees.
Start a Part-Time Job
Sometimes, even the cheapest loan can still be unaffordable. If this is the case for you, consider starting a side job to generate the extra cash you need. It may take a while but the rewards are sweet.
To start off, analyze your skill set to see which job you can start. Next, look at your daily schedule to find pockets of time you can utilize to get the job off the ground. For instance, if you get off work at 5 pm, consider driving an Uber for 3 hours every weekday. Increase the hours during the weekend because you won’t be at work.
You can also consider leveraging your skills for cash such as web development, writing, transcription, or become a virtual assistant, etc. Platforms such as Upwork and PeoplePerHour are some of the places you can start hunting for jobs.
The only disadvantage to this method is the amount of time it’ll take to get the required money. The main reason being the amount of time needed to pull in high-paying clients. However, keep in mind that your overall effort will determine your success in the freelance world.
Consider a Credit Card Cash Advance
Before you skip past this method because of its reputation, you’ll be surprised to find out that credit card cash advances don’t hit triple digits. Now that your curiosity has been piqued, let’s get down to the real business.
If you’re confident you can repay the loan in a few weeks, which is the conventional repayment period for title loans, and you have a credit card with access to a credit line, then you may access the same funds but way cheaper than a title loan.
The obvious danger with this method is the compounding interest rates that will pile up as you pay off the initial balance. Therefore, when taking out a cash advance, do so only after committing to a short-term repayment plan. For car title loans, it’s common for borrowers to roll over the loans several times, which ends up being costly.
Consider Charities and Social Services
From the title, it may seem like an absurd move but the truth is they will come in handy. However, you’ll only access emergency cash from general relief offices or state welfare offices if you meet the requirements.
Apart from cash, you may also get assistance in the form of reduced-cost services including internet service and childcare, or food stamps. You can also approach churches and other charities that may have structures to help individuals in society. Help from these quarters may be in the form of food, education, housing, and job hunting.
Negotiate the Loan Terms
Many people believe the loan terms set by the lender are final. Wrong. You can always negotiate with the lender and find a common ground that suits your financial situation. This is an excellent step for borrowers with existing loans and who are finding it difficult to make the installments.
Some of the areas you can consider when negotiating include waiving late fees, a low-interest rate, and arranging for alternative payments. However, this will depend on the lender’s situation and history. Therefore, it’s best to research the lender to see whether they are open to any negotiations.
Seek Financial Advice
If you’re in a tight financial spot and you find it difficult to overcome the situation, it’s time to seek professional financial advice. Yes, it may be expensive but there are low-cost options available in all the states.
A financial advisor will be of great help in terms of formulating strategies that will cut down on expenses, opening up new money-making ventures, offsetting any outstanding debt, and opening a savings account.
The Bottom Line
Title loans are known for their exorbitance not to mention that their main target is the low-income demographic. What’s more, it’s easy for the borrower to get into a vicious debt-cycle and the result is losing your car.
Financial problems can be hard to solve and that’s to be expected. However, if you intend on achieving financial freedom, you must start by solving these issues. Overall, acquire money-management skills to help you in the long run.
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