A title loan is a great way to obtain instant cash in exchange for surrendering the vehicle’s title to the lender until everything’s paid off. In Utah, title loans in Ogden, Provo, and Sandy are generally better than unsecured cash advances. The former can give you access to a large amount of money with potentially half of the latter’s interest rate. The best part is you’ll get to keep and use the vehicle throughout the term.
Apart from the typical principal and interest payment option, you can pay interest only for a certain period to keep early repayments low. No matter how attractive it may be, though, take note of the following to know if an interest-only title loan is for you:
Unchanging Principal During the Initial Term
As you’ll only have to pay for interest initially, any repayment you make within this period won’t cut the principal of the loan. This means the loan balance will remain the same until the interest-only period is over. Naturally, this payment model extends the length of time necessary to finish the title loan.
Larger, Future Repayments
The difference between the interest-only and interest and principal and interest repayments can be great. It’s imperative to make sure you’ll have adequate money to deal with the large repayments, or else you might experience “payment shock.”
If you default on your title loan, your lender might take your vehicle to cover your unpaid balance. If the vehicle you used to obtain financing is your only means of transportation, losing it might make it difficult for you to commute to and from work or pick your kids from school.
Like other debts, an interest-only title loan comes with risks. It’s not for everyone, but it can be beneficial to those who understand how to manage it responsibly. Assess your personal situation and do the math before you apply for this financing option.