Car Title Loan in Australia
Is a Car Title Loan Right for You?
A lot of the time, when we think about vehicles and loans it’s because we are dreaming about borrowing the money to fund the purchase of a new car. Who doesn’t feel excited about the idea of getting behind the wheel of a new vehicle for the first time? Of course, there’s an increasingly wide and varied range of financial products available to help us get into a new or used car these days.
However, that’s not what we are looking at here. Drive away loans, or auto title loans as they’re also known, are completely different from the financial loans that you get to buy a car. Instead of borrowing the money that you need to buy a vehicle, an auto title loan allows you to raise money.
So, you are getting cash from your vehicle, rather than for a vehicle. This is something that may be right for many people who need to get hold of some cash right away.
What is a car title loan?
A car title loan is where the owner of the vehicle uses equity in their vehicle as collateral. The amount of money that can theoretically be borrowed against a car varies from one money lender to another. However, the maximum will always be based on the value of the vehicle and the amount of equity that there is in it.
If a car has a wholesale value of $15,000 the maximum that could be borrowed would be half of that, which is $7,500. To take out the cash loan, the borrower must also have clear title on the car. A cash loan won’t be considered if there’s outstanding finance on it already.
The loans range from $2,000 to a maximum of $15,000. However, there are some money lenders who work to differing criteria and for shorter and longer periods. Compared to more traditional forms of lending, these short-term, reasonably low-amount loans have relatively high interest rates. This is because they’re designed to be paid back sooner than a loan from a bank or somewhere similar would normally be.
Why is a car title loan so popular?
This form of money lending is mostly designed to help people out in the short-term when they need to pay for something urgent or need tiding over until the next pay check arrives.
The CoreData/Financial Mindfulness Financial Stress Survey in 2017 showed that close to 1 in 3 Australians are under stress due to money worries. In many cases, they simply don’t know where to turn to in order to get hold of some money urgently. This can lead to health problems and can even harm relationships over time.
You might think that using a credit card offers a way out. Yet, the Australian Securities and Investments Commission (ASIC) revealed that over 18% of Australians are already struggling with their credit card debt. This translates to over half a million borrowers who are behind with their loan repayments.
Anyone who owns a vehicle can quickly sort out the loan funds that they need by using it as security. For many people, this is a lot quicker and easier than trying to sort out any other type of loan. In this way, the money concerns are immediately resolved so that life can go back to normal.
Benefits of car title loans?
One of the biggest advantages of a car title loan is there’s no need to have a good credit rating, and that’s because the loan is secured against the vehicle. This means if someone has bad credit but they have a vehicle that has equity in it, they can gain access to finance they might not be able to get otherwise.
Unlike many other forms of credit, an auto title loan is quick and easy. They are available from money lenders operating from stores or online. They take as little as ten minutes to arrange, and the money can be put in the bank or taken as cash on the spot
Despite using a vehicle to take out a loan, the borrower can still carry on using the vehicle just as before, if they are based in Queensland. The title is retained by the money lender in case the borrower can’t pay back the loan. But once the cash loan is repaid the title returns to the owner.
Although this may sound a little like a payday loan or cash advance, because there’s collateral the interest rate will be lower than those unsecured forms of borrowing. As we said already, a car title loan isn’t the cheapest way of borrowing money, but it’s usually going to be more affordable than payday loans and cash advances.
As well as being easy to take out, a drive away loan also offers quick and easy repayment options. The required repayment schedule will be stated upfront, and the payments can be made either in person or online from a bank account or debit card.
Like any form of credit, the borrower should always make sure the cash loan is appropriate for them and they fully understand the terms. Many lenders will ask for a spare set of keys to be handed in with the title, and in some circumstances a tracking system may be fitted to the vehicle. All of this will be made clear in advance though, and don’t be afraid to ask anything you’re not sure about as there’s no such thing as stupid question when it comes to borrowing money.
Paying off your car title loan
A loan of this kind is typically paid off quite quickly. Some lenders may put on a timescale such as 30 days from the date it starts. In this case, if you can’t pay it back in time then you could request to roll it over to a new loan period.
A car title loan can also be offered without a fixed repayment date. Since the money lender holds the car title, they will retain this document until it is convenient for the borrower to pay off the amount that they borrowed.
Of course, it is important to remember the risks of not being able to pay off the loan. If you need the car to travel to work or for any other reason then any delay in getting it back can be frustrating. For most people, it pays to get back their vehicle as soon as possible.
Are there any alternatives?
This isn’t the only way of getting hold of some emergency cash right away. However, it works out as being the smartest for many people in differing situations. The following are some of the other options.
- Credit card: This is arguably the most convenient way of meeting unexpected expenses. The problem is that it may be difficult to pay off afterwards, as interest is added on every month, even if you pay off the minimum amount each time.
- Personal loan: A loan from a bank offers a structured approach to borrowing money and paying it off. The main issue could be that it is often difficult to get it agreed at short notice, while poor credit history will work against you.
- Cutting down on some of your outgoings is always a good idea when you are in financial problems. This might seem impossible to do at first, but you can start off by listing your outgoings and then seeing where you can trim back a little. You might be surprised.
- Earning more money with a temporary job is a fantastic way of clearing up financial difficulties. Obviously, finding a suitable job at short notice isn’t always possible, though.
Like any form of credit, the borrower should always make sure the cash loan is appropriate for them and they fully understand the terms. Many money lenders will ask for a spare set of keys to be handed in with the title, and in some circumstances a tracking system may be fitted to the vehicle. All of this will be made clear in advance though, and don’t be afraid to ask anything you’re not sure about as there’s no such thing as a silly question when it comes to borrowing money.
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