Not everyone has enough savings and a stable financial situation that will allow them to spend for their basic needs. Sometimes due to unforeseen events such as emergencies and reduced work hours or worse, even job termination, people have a hard time finding other means to borrow their much needed money. Fortunately, there are title loans available which they can take advantage of.
The car title loan is one common type of secured loan commonly availed of by cash-strapped people. Being a title loan, it requires the submission of a collateral which, in this case, is your vehicle.
Some people, however, do not have a full knowledge of what’s involved in taking out a car title loan. As long as they can get their needed cash, they don’t see any reason why they need to dig deeper.
For those curious, here are the secrets behind auto title loans to give you a clearer view of the charges involved.
The interest aspect varies among lenders. It is the amount charged on your outstanding balance every day until the total loan amount is paid back in full.
Borrowers should understand that every loan payment is used first to pay for the various charges due such as late fees and fees charged to bounced checks. Any extra amount is then paid to your interest and outstanding balance.
Making early payments has its advantages and this is what borrowers should definitely keep in mind. This is totally different from paying on time or paying on the due date specified in your contract.
When you pay early, before your due date, the interest due from that payment will be lower than normal. This is because you are already paying back that specific payment’s share of the outstanding balance earlier.
And since interest is calculated on a daily basis, you can be sure to enjoy a lower interest if you’re consistent in making your early payments. You can then pay off your loan early and may even pay less in finance charge allowing you to save a significant amount.
On the contrary, late payments often lead to a high interest which increases every day. This means that the amount you pay will not be enough to pay the normal amount of the outstanding balance. In fact in some cases, a late payment will not even be able to pay the interest you owe and any outstanding balance.
Another disadvantage of late payment is it will force you to pay more than the prepaid finance charge (which includes the administration fee). If this happens often during your loan repayment period, the loan will even cost you more than normal.
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About the guest author:
James Jones is a professional blogger that provides advice and information on debt, loans and auto title loans. She writes for InstaLoan, the best place to apply for a car title loan online.