In today’s economy many people are forced to find alternative ways of raising cash to pay off their bills. Since unemployment rates are high and banks are unwilling to give personal loans, many people are in need of creative ways to borrow money. These new forms of alternative borrowing is a car title loan, also known as a pink slip loan, or a collateral loan.
Car title loans are simply loans where the borrower provides the title of their car as collateral when they are given a loan. These loans are generally for no more than a few months and carry extremely high interest rates. This type of loans is geared towards individuals who have a means to pay back the loan, but have poor credit scores. Most car title lenders will give car title loans for as low as $100 and up to 50% of the car’s resale value (provided you have made enough payments on the car). In the event the borrower defaults on the loan, the car is sold and the proceeds of sale are used to pay off the loan.
A car title loan, which is also referred to as a collateral loan, is often times considered as a last resort by the borrower. Due to the high interest rates and low risk to the lender, a pink slip is far more beneficial to a lender. Several states, including Illinois and California, have placed heavier restrictions on pink slip loan lenders. The restrictions put lower caps on how much someone can borrow and what interest rate can be charged.
Similar to what one would get at a car title loans Los Angeles provider, a collateral loan is a loan where a borrower pledges a certain asset to the lender as collateral should they default on repaying a given loan. The difference is that a collateral loan can use basically any asset that a collateral loan lender is willing to hold. These assets are normally jewelry or other items of value which need to be separately appraised prior to the loan being given.