How do Pink Slip Car Loans Work
Pink slip loans are a loan option if you are looking to gather some cash rather quickly. Pink slip loans may also be referred to as car cash loans, or car title loans. Here is some general information on these types of loans.
The basics of a pink slip loan is that it is a type of secured auto loan. A secured loan means that it is being backed by a piece of collateral. An example of a secured loan is a home equity loan since you are borrowing against your house. In this instance, it is going to be your car. This means your car is being used as collateral for your loan. There are pros and cons of that, but that will be discussed later. Pink slip loans are available for anyone who has a car. In essence, it is just like a pawn deal for your car, except that you can actually drive the car while the loan is in progress.
There are some very real benefits of these types of loans. The first is that anyone with a car can get this type of loan, regardless of your current and previous financial standing. This leads into the next advantage which is that there are no credit checks required. Someone who just went bankrupt can even get this loan as long as they have a car. The lender will not have to seek monetary repayment from you if you default, they can just take possession of your car. Another plus is that the deal happens very quickly, since there is no approval needed. You can have your money within a couple days ready to use.
As with many things, there are also downsides as well. The downsides may outweigh the positives, but if you really need the money quickly, then this may be your only option. The first downside is the amount of time the loan lasts for. Most loans are paid over years, but these loans are paid within a month or two. That means you only have 30-60 days to pay back the loan. This can potentially be bad. Another problem is that the interest rates are incredibly high. Paying 20 to 30% isn't too bad, except that these are monthly interest rates which turn into hundreds of percent when referring to it in an annual sense like we are accustomed to. Keeping with interest, if you default on the loan, your interest rates can be raised even higher. They will give you some more time to pay back the loan, but in return, your interest rates will skyrocket. You may pay double or triple just in interest, and then the original principal. The last downside is that if you default, instead of raising the interest rates, they can just take over your car since they hold the title during the loan time. Chances are you will not have the financial standing to be able to lose your car, so it would not be good for you or your family if the car was lost.
The cons seem to outweigh the pros, however if you really need money quickly, it may be your only choice.