Car Title Loan – The Popular Personal Loan With Collateral Security

 

Personal loans are usually unsecured with lenders carrying the maximum risk because if you do not repay the loan, there is nothing much they can do. Some creditors use strong arm tactics for defaulters, but it is a two-edged sword because it can damage their reputation. Another way is to sue the defaulters and take them to court, but the protracted process does not encourage lenders who are eager for a speedy recovery of money. For unsecured loans, lenders rely mostly on credit scores of borrowers to ascertain the level of risk involved. Borrowers with satisfactory credit scores are reliable to lenders because they too must be keen to retain the good ratings, and this reduces the chances of defaulting on loans. It is a calculated risk that lenders take.

For people who have bad credit scores fall out of favor of lenders who give unsecured loans. Even if they manage to find someone willing to lend money, the interest rate will be so high that it can turn away borrowers. Looking from the lenders perspective, you cannot blame them because they have to protect their risk by charging high interest. As the borrower with poor credit score is a known offender, they have to take the beating if they stick to unsecured loans. Alternatively, people with poor credit score can look for lending institutions that do not consider credit scores at all.

Secured personal loans

Your search for creditors who give personal loans without referring to credit score will lead you to secured personal loans. These loans are similar to any other personal loans but do not take into account your credit score when considering eligibility. While credit scores indicate the reliability of creditors and reduce the risk of lenders, in the case of secured loans, you must provide some asset as collateral security to get the money. This type of personal loan with collateral security completely covers the lender’s risk and is the reason why they do not consider credit scores at all. If you do not pay back the loan, the lender will liquidate the asset that you have pledged to recover the dues.

Win-win for borrowers and lenders

Secured personal loans create a win-win situation for both borrowers and lenders. Borrowers are happy because they get the loan despite bad credit history and lenders are glad that they are able to minimize their risk.  It is easy to get this type of loan as the process is straightforward and simple. Loan applications that involve background checks and evaluation of the creditworthiness of borrowers take longer time for approval. For secured personal loans, the risk is more on borrowers, because they can lose the asset that they have pledged. Unless the borrower has the wrong motives, he or she will not like to lose the asset and will honor the terms of timely repayment.

Assets used as collateral

Personal loans are usually for a smaller amount than other types of secured loans such as home loans or loans for business. Assets are the last thing that borrowers like to lay their hands on because building assets take time and replacing assets is not always feasible. Therefore, people prefer secured loans when there is a dire necessity, and they are confident of handling the risk involved in offering the asset as collateral. Bad credit scores are another reason that compels people to turn to secured personal loans.  From your home to your car and from savings accounts to investments, anything can become collateral security, provided the law permits the same, and the lender accepts it. You can use insurance policies, machinery, equipment and even bill receivables as collateral.

Asset valuation

Lenders are interested in recovering the maximum amount in case borrowers turn defaulter. They do it by ascertaining the value of assets and then offering a loan that is less than the value that is determined. While physical assets are valued much higher, investments have 50 percent of the value. Since investments are volatile, valuing it at minimum gives lenders the opportunity to cover their risks in a better way. The amount money you get depends on the loan to value ratio also known as LTV. If the value of the pledged asset depreciates during the tenure of the loan, you may have to replenish it with additional assets.

Title loans for quick money

Although secured loans are quite common in business and less common for personal loans, car title loans are attractive personal loans with collateral. You can get such a secured personal loan anytime, provided the car title is in your name, and it is free from any encumbrance. If you need a title loan, Bay Area Title Loans is a company that can help you out. The lender puts a lien on the car, and you can walk away with the loan in a few hours.

Get low interest

When you avail secured personal loan, you can expect less interest than that of unsecured personal loans. The interest rate depends on the tenure of the loan, amount of money and the extent of risk on the lender. Since the risk of lenders is the least for secured loans, they do not mind to charge lower interest. The loan amount for title loans depends on the value of the car that you offer as collateral security. The car’s age, make, model, condition, and mileage are some of the determining factors for the loan amount.

Whether or not you want to take a secured personal loan will depend firstly on your credit score and secondly, how quick you want to get the loan and if it is a dire necessity. It is only when your credit scores are low that you might explore title loans because it does not consider credit scores to determine loan eligibility. The car is the only thing that qualifies you for a title loan.

Log on to https://bayareatitleloans.com to get the best deal in car title loan that can come handy to meet some short-term need for money. With online application and minimum paperwork, you get the loan within a day on favorable payment terms.