Car Installment Loans: What Are They & Are They Different Than Auto Title Loans?
Even if you are unfamiliar with the term “installment loan” it is likely that you have either heard of it and are just unaware of the name or you have actually used one. An installment loan gives you access to a large amount of cash, often used to cover one-time expenses, but has longer repayment terms than other loan types. An installment loan will come with a fixed amount that requires you to pay fees and interest in regular payments, either weekly, bi-weekly or on a monthly basis. Common types of installment loans are car installment loans, student loans, and personal loans.
How Much Are You Able to Borrow?
This is solely dependent on the lender but generally, you can get a car installment loan for anywhere between $1000-$5000. Some lenders may do less than a $1000 and some may do up to $10,000. Whereas, an auto title loan will use the title of your vehicle as collateral and give you a 24%-50% borrowing amount based on your vehicle’s market worth.
What Do the Repayment Terms Look Like & Are There Fees?
A car installment loan is generally repaid back to the lender in monthly installments across a twelve to ninety-six-month period. The longer the loan repayment period, the higher the interest rate will be. This means that you will end up paying more for your vehicle on a ninety-six-month loan than on a thirty-six-month loan.
An auto title loan often has repayment due within 30-days to a few months depending on how much you are borrowing and which lender you are using.
Yes, there are fees for administrative reasons such as the processing of the loan or insurance fees.
How Are The Interest Rates With Car Installment Loans?
Unfortunately, it is not surprising to see a three-digit APR rate on both installment loans and auto title loans. You are looking at 15 percent to 60 percent on a car installment loan .If you shop around for a longer term loan over 2-5 years, you may be able to refinance your loan down to a smaller interest rate.
What Requirements Are Necessary to Get a Car Installment Loan?
In order to even apply and qualify for a car installment loan in Canada, you must fit the following criteria.
· You must be of legal age or older within your province of residence.
· You must own a vehicle to qualify for a car installment loan.
· You must have your name on/have clear ownership of the title of your vehicle.
· Your vehicle must be insured in your name and registered to you.
· You must have a valid Canadian Driver’s License.
· You must have proof of permanent residency within the country.
· You must have a vehicle that is no more than ten years old.
· You must have proof of income with an active bank account.
· Although you do not need excellent credit, as some car installment loans are aimed at individuals with bad credit, it is highly recommended.
If you only meet some of the criteria and not all, it is unlikely that you will get approved by a lender.
What to Watch Out For With Car Installment Loans?
Be very wary of the following as these are predatory lending practices.
· Guaranteed approval as this does not exist in the business.
· Non-traditional payment options like gift cards or untraceable methods.
· Upfront fees or payments.
· Fees for paying your loan off prior to the end-date.
· Pressure to borrow more than what you actually need.
It is always recommended that you take a look at your budget and make sure you have the ability to repay the car installment loan. Otherwise, you may end up getting stuck in a long-term cycle of paying off the debt.