When you think of title pawns you might picture the modern-day equivalent of payday loans. Title pawns have a fascinating and long history.
In the early 1900s, title pawns were created to help people get fast money without going through a bank. This is how they work: Someone would borrow money using their car as collateral. They would lose their car if they were unable to repay the pawn.
The Great Depression saw title pawns become popular to allow people to keep their cars while looking for work. They were also associated with violence and crime. The Truth in Lending Act was passed by Congress in 1933. It regulates title pawns as well as other types of financings.
Title pawns remain a popular method for quick cash but what are title pawns exactly?
What are Title Pawns?
A title pawn allows you to use your car as collateral for a financing option. A title pawn is a type of financing option that uses your car as collateral. The value of your vehicle will determine the amount of the pawn. You will usually have to repay the pawn within 30 calendar days. The lender may repossess your vehicle if you fail to repay the pawn.
Title pawns can be high-interest financings and should not be used for emergencies. A title pawn’s interest rate can reach up to 300% so make sure you have the funds to repay it.
You should first ask a friend or family member for money if you’re considering a title pawn. You can also search online for title pawn lenders if you are unable to get money from your family member. Before you apply for a title pawn, compare the interest rates and fees.
A title pawn is a good option for those with bad credit. You should only apply for a title pawn if you’re certain that you can repay it. You could lose your car if you don’t.
Title Pawns: How do they Work?
The title pawn lender will keep your car’s title as collateral when you take out a title pawn. The lender can take your car if you are unable to repay the pawn. Title pawns are usually smaller financing options than traditional auto financings and have much higher interest rates.
Let’s say that you need $500 to get by. You take your vehicle’s title to a title-pawn shop. You will receive $500, or sometimes less depending on your vehicle’s value. The title pawn plus interest and fees will be repaid within a few weeks to months.
The lender can take your vehicle if you are unable to repay the title pawn. It is important that you only take out a title pawn if you are certain, you can repay the pawn.
What are the Requirements to Get a Title Pawn?
You will need a free and clear car title to get a title pawn. Also, you will need to provide proof of residency, proof of income, and a government-issued ID. You may need additional documentation from some lenders, but these are the basics.
Once you have all your documents organized, go to your local title shop to speak with a pawn officer. The pawn officer will help you complete the paperwork and get you going. In most cases, you will be able to walk out of the shop with your money in hand within minutes.
Compare interest rates and fees before you sign up for a title pawn. It is important to fully understand the terms and what happens if you don’t pay it back.