Have you wondered what car title loans are? These loans use cars as collateral. You can of course use the car but the title of the car belongs to the finance institute that you have borrowed money from. People who have no credit or bad credit usually opt for car title loans. The main advantage that lenders have in giving car title loans is that they can sell the car in case there is default.

In today’s recessionary situation you find many people taking loans on car that they own. Here are some important criteria’s that you need to fulfill to be eligible for car title loan.

a) The borrower must be employed and the status of his employment should be verifiable by the lender.

b) Some borrowers may require you to have an active current account which has a good standing for at least 3 months.

c) The third and the most important condition is that any previous loan taken on the car must be paid off.

d) The borrower must be the sole owner of the car.

It is important that you know the difference between refinance of car loan and taking a second loan on the car. By refinancing your existing car loan you pay back the amount borrowed from the previous lender. On the other hand, by taking an additional loan on the car you do not pay back the previous lender. Instead you borrow extra money from a new financial institution. You can obviously refinance your existing car loan but you cannot take a second loan on your car.

The amount of loan that you can take depends on the lender. However, do not expect to get loan equal to the present value of the car. This is because the value of the car depreciates fast and lenders want to minimize their risk. The amount of loan that you can get under car titles vary anywhere between “$500 to $45,000”. In some situations the amount of loan will depend on the credit rating of the borrower despite the fact the lender has title of the car as collateral. Other factors that lenders could look at is your previous loan repayment history, your current residential address and the ownership status of the house that you live in. Some lenders may also look at your employment status and the number of employment years.

So clearly car title loans help you in getting loans easily without much hassle. Some people use these loans as collaterals to get business loans. Whatever be the reason of taking a car title loan my only advise is to borrow wisely.