What is The Effect of Car Title Loans on Your Credit

Do [car title loans] affect my credit? If you have a similar question, read this blog to find the answer. But the answer isn’t as straightforward as it might seem. There’s a mixed opinion; some say all credit use affects the credit score, and others say secured loans shouldn’t impact the credit score.

A car title loan will likely affect your credit score. Still, your repayment plan will essentially decide up to what extent. Your credit score will improve when you use credit and repay it within the terms. But if someone uses too much credit, their debt-to-income ratio will become off-balance, and therefore the score spirals down.

Title Loans Don’t Require a Good Credit Score.

A car title loan doesn’t impact your credit score significantly. A secured loan means you are putting your asset up as collateral. This means if you default, you will lose that particular asset. This is different from unsecured loans, where you need to check a person’s credit score because there’s no such thing as collateral in the agreement. That’s why you often need to gain enough trust by having a high credit score for the lender to give you some money.

You don’t need credit checks with a car title loan since lenders don’t need to gain trust. Putting your asset as collateral is enough to ensure both parties abide by the agreed terms. Moreover, you don’t need to set your car title loan as debt since your car is equivalent to the line of credit. So, a car title loan won’t affect your credit score that much. The more critical risk with a car title loan is potentially losing your car when you default. This means your credit score is the least of the issues here.

Using Title Loans Wisely

Some might say it’s unwise to go for title loans. But this isn’t always true. Title loans provide an opportunity for people with bad credit scores to see off a financial emergency. People whose mortgages are due and waiting for a check clearance. You can also use title loans if you have other significant payments due and are waiting for program payment. That’s an intelligent way to get money, make those payments, and protect your credit score.

But yes, habitual use of title loans means you need to handle your finances better. So make sure you only go for such loans when you need them most. While it might slightly affect your credit, it will definitely affect your budget. Therefore, it’s advisable to read the terms carefully before agreeing to any payment plan.

Contact Advantage Finance, LLC

If you are in a financial emergency, feel free to contact Advantage Finance. We can help you avert such problems. We understand that title loans aren’t always the answer. But they can be valuable when you need them. So, don’t let due payments hinder your credit score anymore and allow title loans to see off any financial commitments or emergencies. Please call us today or fill out the information form.