A motorcycle title loan is a secured loan that uses your motorcycle as collateral. They fall into the class of loans referred to as title loans.
Title loans are designed to let asset owners (such as motorcycles and cars owners) access fast and convenient loans. Recent statistics show that more than 2 million Americans obtain title loans every year.
What to Consider Before Getting a Motorcycle Title Loan
These types of loans are popular for two key reasons. First, motorcycle title loans are a fast way to access cash. The entire process is typically completed in just a few hours.
Second, lenders do not perform a credit check before approving motorcycle title loans. The loan is already secured by your bike, and so you do not need a good credit score to qualify.
How Do Motorcycle Title Loans Work?
Motorcycle title loans require the borrower to temporarily surrender a hard copy of their deed to the lender. Once the loan is fully repaid, the lender discharges the title deed to the borrower.
Documents required for them are; a filled application form, title deed of the motorcycle, a photograph of the motorcycle, photo ID, proof of residence, and proof of motorcycle insurance.
You will be allowed to pay back the loan in a single installment after one month. Unlike most other loans, you do not need to disclose your reasons for taking out the loan. You can use a motorcycle title loan for emergencies and any other personal need.
Now that you understand how they work, let’s examine the key factors you should take into consideration before applying for one.
Key Things You Should Consider Before Taking a Motorcycle Title Loan
1. Interest Rate
Interest rates should be a huge consideration because they affect the overall amount you will have to repay. Unfortunately, some lenders consider motorcycles as luxury items and assume borrowers can pay higher interest.
It is therefore important to choose a lender who offers good motorcycle title loans with competitive rates. Find third-party providers for motorcycle title loans online to connect you with the lowest interest rates in the market. They help you pick the right loan and rates that best suit your needs.
2. How Much Can You Borrow?
Motorcycle loans are flexible and you can get up to $20,000. Your loan amount will depend on your motorcycle value. Usually, you can obtain up to 70% of the equity of your motorcycle (the amount of your motorcycle value that you own outright).
How much money you can borrow also depends on your state. For instance, in the state of California, the lowest motorcycle title loan you can borrow is $2,500 – though you need to have an income of at least $ 1,200 to qualify. In addition, California State allows them to be approved online in just 30 minutes.
3. How Do You Plan to Pay Off The Loan?
Though motorcycle title loans are easy to access, they have a short repayment period. It is essential to borrow a loan amount you know you can repay.
Having a clear repayment plan can make all the difference between fully repaying your loan and defaulting. Carefully plan your budget for the next month to factor in your loan repayment. If you have a tight budget, seek ways to make some extra money to cover your additional financial burden.
4. Fees and Charges
The interest rate isn’t the thing you should check on your loan. Check for common fees and charges such as application fee, processing fee, document preparation fee, late payment fees, and credit insurance fees. The extra fees and charges vary from lender to lender. It’s critical to check that they are not too high, so you are not lured into a debt trap.
It is important to communicate with your lender if you think you are going to miss your repayment date. If you give your lender a heads up, they can work for a solution with you and protect you with a motorcycle title loan.
5. Reputation of The Lender
You want to work with a trustworthy and respected company. Find out how long the lender has been in business and whether they have a good reputation. Check online reviews. They are written by previous customers and provide useful details about the company.
Getting a loan approved to meet your personal needs can be a challenging process, especially if you have a bad credit history. Motorcycle title loans provide a quick option to get instant cash when you need it the most.