Pros and Cons of Auto Title Loans You Should Be Aware Of

I don't have a car and have no plans on getting a car in the foreseeable future. I do know, however, that for some people a car is a necessity. If it is, Dave Ramsey would suggest buying a car in cash, even if it is a bad car, and save up cash to buy a better car when you can. While that is ideal, some people don't have the ability to pay for even a cheap car in cash, and therefore need to take a loan for their car. If you do plan on getting a car loan, consider these following things, in a post written by a reader.

Taking out a car loan is a significant undertaking, given you have to make adjustments to your budget and spending in order to pay off your car properly. If you can't afford a car yet, this means you might be taking an auto title loan. It's therefore essential to consider the following factors first before taking out one for yourself.

Considerations to Check First

Before you even consider the advantages and disadvantages of getting a loan, it's important to remember that there are some factors that revolve around these pros and cons in the first place. These essential factors all revolve around you. Here are two things to consider:
  • Your budget matters.
    • This is perhaps one of the most important parts of taking out a loan.
    • You have to be able to commit to your monthly payment, or you will be buried in debt. Worst, your car can be taken away from you as well.
    • Before you even decide on taking a car loan, check if you are even capable of getting the repayments appropriately paid.
    • If this means cutting out certain luxuries for an extended period of time or getting an extra job, then these are things you should factor into your choices.
  • Your credit score matters.
    • This is perhaps the one edge you can use when it comes to negotiating deals with dealers.
    • Remember, your credit score is your way of showing that you always pay your dues and you are an "ideal spender."
    • This means personal loans get easier to access when you have good credit.
    • A low credit may mean higher interests on your end, or worse, lower chances of getting your car loan in the first place.
    • Thus, it's important to maintain an excellent credit rating, so you have more bargaining power over negotiations.

These are just some of the many factors you will consider when taking out a loan. It's important to remember that you will have to make sure your finances are intact - or you have a way to make them intact - in order not to be overwhelmed by the loan.

Pros: Auto Title Loans Are Accessible

It's important to understand that auto title loans may tend to be costly, but they do have their advantages. Despite the negative perception towards dealer financing, there are still some perks towards getting an auto loan from them. After all, sometimes, these "bad rep" tend to be unjustified. Here are some of the perks you can get when applying for an auto loan:

  • You can extend your terms.
    • Some auto dealers tend to be more liberal when it comes to auto loan terms.
    • Some unions and banks tend to have fixed extended-term financings such as 72-month offers on demo or new devices.
    • Some dealers, however, can even charge long-term financial loans on vehicles that are already a few years old.
    • Of course, these extended terms can cost you more in the long run, but if you're the type of buyer with the limited monthly budget, this is for you.
  • Higher advance or loan-to-value ratio is a thing.

    • A lot of credit unions and banks tend to be strict regarding loan advances.
    • However, some auto dealers can do financing with aggressive loan-to-value ratios such as 110-percent of the value, versus 80-percent of the value.
    • Of course, no one wants to end up paying for more than the expected value of a car, but sometimes this can be helpful.
  • It's convenient.

    • Instead of having to deliver or transfer essential documents such as bills of sale or buyer's orders to different locations, these dealers can do the job for you.
    • They tend to ask you extra cash, but the financing experience they will provide is much more convenient especially if you're always on the go.
    • This is something you experience with auto dealers, as they also tend to have a wide range of deal offerings you can choose from.
    Cons: Study Your Loans Carefully
    • There are a lot of add-ons to refuse or accept.
      • Aside from the terms themselves, these dealers tend to add some add-ons or extra features that on one end can be useful, but on the other end can be offered for a much cheaper deal in other shops.
      • Always ask if you can do the "extra" stuff yourself, or if you can hire someone to do it for you. If the answers to these questions are "yes," then you're most likely better off without accepting the add-ons and extras.
    • There are third-party factors.
      • Unlike credit unions and banks, auto dealers tend to have dealings with third-party groups such as auto finance companies and banks.
      • You better check the credentials of these affiliated institutions to make sure they are trustworthy in the first place.
    • It can be costly.
      • Given that auto-dealers tend to be convenient places for services, they also have a tendency to offer you a wide variety of add-ons for your car purchase.
      • Sometimes, they can add minor interest increase that can have a big blow to your budget in the long run.
      • It's not illegal or unethical, though, as this is merely a commission for arranging the financing for you.


    Getting yourself a car through an auto title loan can become a significant step towards financial stability, given the perks of having a car for yourself. For lender information refer to to find an auto title lender near you.

    However, you will have to go through a lot of budget and spending adjustments before you can entirely pay off your loan. Considering the pros and cons above, we hope you’ll have a better outlook on whether or not an auto loan is a good choice to make.

    See my disclaimer.

    Penniless Parenting

    Mommy, wife, writer, baker, chef, crafter, sewer, teacher, babysitter, cleaning lady, penny pincher, frugal gal

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