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Loans in Canada are sought out for a variety of different reasons. However, as Canada becomes an increasingly popular place to live as reflected by the real estate market, loans become increasingly competitive to get qualified and approved for. If you’ve had difficulty securing financing in the past, fortunately for you there is a type of loan known as a car title loan. A car title loan is very easy to get approved for as long as you put up your own vehicle as collateral. If this seems like a type of loan that you would be interested in, the good news is you can now acquire a car title loan from the comfort of your computer. You’ll be able to procure a car title loan in Canada with ease as long as the qualifications are met.
The difficult part is being able to connect with a company that is compatible for you because there are so many to choose from. In an effort to make your research process easier, Smarter Loans has created a directory below where there are many qualified car title loan providers listed alongside their terms, rates and offers. Scroll through the options that we’ve listed out and once you’ve found a good match for your specific needs, you’ll be able to submit an application directly by clicking “apply now” next to their name.
If researching the various car title loans is too time-consuming, alternatively you can pre-apply with Smarter Loans and we’ll look through the car title loan offers and assign the best-fitted one to you.
We can help connect you with the top car title loan providers in Canada.
Personal vehicles are some of the most common assets that everyday consumers possess. This is attributable to their utility as they facilitate transport from Point A to Point B quickly and efficiently. However, beyond this basic function, the tangible asset value of the car serves as a method for gaining short-term loan funding from a provider of such services. In other words, because cars are an asset that have their own value (just like a house), this value can be used as collateral to gain funding.
The car title loan is a short-term funding tool that can be used by borrowers with low credit scores to borrow money by putting their car up as security (collateral) for the loan. While the conventional route is to use a car as security, some providers do allow for other vehicular transportation such as motorcycles, recreational vehicles or scooters to be used as well. By definition though, to get a car title loan, the borrower must own the title to the car.
The way it works is that once the borrower has made the decision to obtain the car title loan, he/she must transfer the hand over the title and a copy of the car keys to the lender for the length of the loan term. Because this is a secured loan (defined as one where the value is driven by an underlying asset i.e. the car in this case), there needs to be unencumbered value in the car. In simple terms, this means that the owner must have equity in the car. The equity condition can be satisfied in two ways:
1. By buying the car outright in cash, in which case the ownership of the car would immediately transfer to the buyer;
2. By paying off the auto loan in entirety, in which case the ownership of the car would transfer to the buyer after paying off all debts from the lending institution;
Once the borrower approaches the lender and states his/her desire to obtain a car title loan, there is an application process where the company will request information to process the loan. Typically, this information includes:
1. The borrower’s name, permanent address and contact information
2. Make and model of the vehicle being pledged as collateral
3. Mileage of the vehicle
4. Insurance documents
5. Employment information
6. Proof of no other liens or claims on the vehicle
7. Car appraisal value/inspection documents
The loan size itself is relatively smaller as it is a loan that is generally used by low credit score borrowers with the intention to fund emergency expenditures. Generally, the better the make and model and the lower the mileage, the greater the loan value that can be obtained.
Similarly, the repayment term also varies across borrowers, wherein some borrowers might choose to pay back the car title loan within weeks while others may choose to borrow for up to a year, or possibly more.
For information about Title Loans check out this guide from the Government of Canada.
Once the information is provided and the car is appraised for its value, the borrower receives the principal amount directly in his/her bank account or as a cheque that can be deposited into the bank within 1-2 business days. The car title loan then may be structured as a periodic repayment loan or as a lump sum payment loan that is paid out at the end of the term. In some cases, if the borrower is unable to pay the loan at the end of the term, they can potentially roll over the loan into a new term for an extra fee.
However, if at any point of time, the borrower fails to make the scheduled repayment on the loan, then the lender holds the right to seize the car to recoup the cost of the loan.
If the car’s value is worth more than the loan, then the borrower will receive the surplus amount after the car is sold and the lender is paid out in full. Alternatively, if the car fetches a value less than the loan’s outstanding amount, then the borrower may still be on the hook for the difference in some provinces.
For this reason, some lenders will often set a parameter for the value of the car to be twice as much as the value of the car title loan being extended, although this amount varies by lender. In certain cases, the car may also be equipped with a GPA and/or car immobilizer to further protect the lender in case of repayment failure from the borrower.
The main users of a car title loan will typically have the following features:
1. Low credit scores, which would make other short-term loan options possibly unfeasible
2. Ownership of a functional car
3. Need for funding to cover short-term or emergency expenditures
4. Lack of other tangible assets that can be used as collateral
Despite the high interest, the car title loan offers certain advantages, particularly to borrowers with low credit scores. Some of these advantages include:
Once the loan documents are approved and signed off by the borrower and the lender, the funds are received within a couple business days and can be deployed immediately. This is a distinct advantage for borrowers who are on a time crunch and would not be able to qualify for other loan options easily.
Although the title of the car is handed over to the lender, the borrower can continue to use the car during this period. This enables them to continue on with their daily lives while the loan is repaid in due time. A consideration to make here is that the lender may ask the borrower to buy extra insurance if the current policy does not insulate them sufficiently.
As long as there is equity in the borrower’s car, the credit score is not a factor. The car is used as collateral, making this loan type “asset-based” i.e. backed by the tangible asset whose valuation can be ascertained on the open market.
The car title loan does not come with any needs for an initial down payment. Once the loan is approved, a lump sum is directly deposited into the borrower’s account.
Notwithstanding the above, car title loans do have to be evaluated carefully before being entered into for the following reasons:
The car title loan often comes with a higher rate of interest than other secured loans primarily because it is targeted to borrowers with lower credit scores. To compensate for this higher risk undertaken, the lenders charge a higher rate of interest.
Entering into a car title loan often comes with affiliated fees beyond the principal and interest payments that have to be paid. Some of these could include administration fees to set up the loan, title search fees, lien registration fees, vehicle evaluation fees etc. It is important for the borrower to understand the fee structures of different borrowers to ultimately reach the most optimal conclusion as per individual needs.
In the event of default on the car title loan, the lender can activate their right to sell the car gained from the transfer of ownership.
As mentioned above though, repossession is not the end of the story in some provinces. If the car valuation is not sufficient to cover all outstanding loan proceeds, then the borrower still has to repay the remaining amount on top of surrendering the car.
While the exact requirements can vary by lender, the baseline requirements are:
In this case, the way that the names are displayed on the title will be the final consideration. If the individual names are written with “or”, then the loan can be obtained by either member of the title. If they are written with “and”, then dual signatures of consent will need to be obtained.
In most cases, larger banks do not offer a car title loan. However, there are several online providers who provide these services in each province.
While employment is not a stringent criteria, it is the most commonly checked factor to ensure that the loan will be repaid in time. Alternatively, if the borrower is not employed, then he/she will need to show proof that they will be able to repay the loan on time. This proof can come in the form of entrepreneurship ventures, bank savings etc.
Once the loan is paid back in full and on time, the title is handed back to the borrower.
Getting approved for a car title loan is much less onerous than you might think. To start, you need to pick a lender that’s right for you. There are a variety of different companies to choose from, so do your research and pick a reputable company with competitive rates. For most car title loans, you need to have equity in the car in question, and you’ll need to show some paperwork – including proof of car ownership, driver’s license, proof of insurance, a valid car inspection and proof of residency. In addition, your car cannot be more than 8 years old. Once this paperwork is submitted to your chosen lender, they will be able to assess and approve your loan.
A car title loan usually relies on the borrower having a car title, and having equity in the car. However, loans are still available for those who are in the process of paying off their car. The loan size will depend on the circumstances: car value, the amount to be paid off, the amount already paid off, and other financial factors. You may have to pay a higher interest rate on a loan of this type though, and not every title loan lender will approve this kind of loan, so it’s worth shopping around to find a company you can work with.
A car title loan is a great way to access cash if you have bad credit, as it is effectively a secured loan. This means that those who do not qualify for traditional loans, for example because of a poor credit score or for other financial reasons, can use their vehicle to act as collateral, and therefore reduce the risk of the loan for the lender. This makes these loans easier to approve, and gives borrowers access to more competitive interest rates. A bad credit title loan is sometimes the only financing option for bad credit borrowers.
Title loan interest rates vary from lender to lender, as well as with the circumstances of the borrower. Your credit score, income, appraisal value of your car, the proportion of equity in the car, and other financial factors may influence your interest rate. Typically, secured loan rates are lower than unsecured loan rates for those with poor credit. Online lenders may have better rates than brick-and-mortar lenders. The range for interest rates for title loans is large though; it could be anything from 20% to 60%. Your rate cannot exceed 60% though, as this is a legal cap enforced by the government.
Borrowing with your car is one way to access quick cash, without needing to meet the rigorous financial requirements of an unsecured loan. The amount you are able to get through a title loan is typically small, ranging from $100 to $15,000. The exact amount varies, and depends on your financial circumstances – your income level, the car value, and the amount of equity in the car. More valuable and newer cars, as well as those with more equity in them, will grant you access to a larger loan.
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