Will a Car Title Loan Go on Your Credit History?
While searching for a title loan, you might be concerned about how it would affect your credit history. If you have a low credit score, you might hope that a car title loan could be a tool used to potentially improve your credit. Some title loan lenders will report your loan payoff to the credit bureaus- so it is important to stay on top of your title loan payments each month! Make those title loan payments a priority each month with a budget. The faster you pay off your car title loan, the sooner that payoff will be reported.
However, depending on your actions as a borrower, a title loan could positively or negatively impact your credit score. Keep reading to learn more about title loans and how they potentially affect your credit record!
How Does Applying for an Auto Title Loan Affect Your Credit History?
A title loan is a secured loan that works by allowing you to use your vehicle title as collateral. Since you use collateral to secure the loan, the approval process can potentially be much more flexible for people of all kinds of credit backgrounds. Yet, when you apply for an auto title loan, a lender will often perform a hard inquiry check. That happens at the end of the loan process, which may affect your credit score by a few points. But don’t worry! You could see it improve with time and effort on your part.
It’s understandable to think that you must avoid a credit check to qualify for a loan if your score is less than ideal. But with a title loan, your credit history isn’t the main focus during the approval process! However, most title loan lenders will still verify your credit. That is just a part of the inquiry process for almost all financing options. However, secured loans can often be more flexible than unsecured loans.
How Does Taking Out a Title Loan Affect Your Credit History?
As a borrower, taking out a car title loan means you begin the repayment process, which could affect your credit. Whether or not it will positively or negatively affect your credit is up to a few different factors:
1. Timely Car Title Loan Payments:
The best thing you can do to your credit is to make your payments on time! If you make consistent, on-time monthly installments, it could contribute significantly to your credit history. In addition, a person who’s responsible for their loan installments can help reflect positively on their credit report.
2. Your Existing Debt or Credit Utilization:
When you take out a title loan, one factor to consider is your existing credit utilization. Suppose your credit utilization is high. In that case, getting a second loan can impact your open credit ratio, as it will increase your utilization.
3. Your Responsibility as a Borrower:
Neglecting or defaulting on your title loan payments can negatively affect your credit. If you don’t pay back your auto title loan in time, the loan will eventually default. Although some title loan lenders don’t report the loan progress to a credit bureau, others might work differently. Some lenders will decide to report the default to a major credit bureau, which could negatively impact your credit. Speak with your title loan lender or provider if you face issues during repayment. They might offer solutions to get you back on your feet and avoid the consequences of an auto title loan default. For example, borrowers inquiring about a ChoiceCash title loan could benefit from an online portal that allows them to set up monthly automatic payments. That tool can make their payments for them if the funds are available! Wouldn’t that be simple?
How Does the Approval Process for Car Title Loans Work?
Now that you know more about car title loans that go on your credit history, it’s time to find out how to apply for one! Thankfully, the process does not have to be complicated; you would only have to follow these three steps to obtain one today:
1. Start Your Loan Inquiry with a Title Loan Lender
2. Submit a Few Required Documents
3. Collect Your Money if You Qualify
Bottom line: car title loans could be a suitable choice when you need cash now! No matter which title loan lender or provider you opt for, you could obtain money in no time. Talk to your title loan provider to start your approval process and see if you qualify for a loan.