Do you own the car completely?
Opting for a pink slip loan means that you will need to hand over the title to your car. In case of default on the loan, it means that the lender will need to repossess your car. Don't be fooled by the easy application process because the consequences can be potentially damaging.
Have you factored in the interest?
Not only will you be required to pay back the principal amount of the loan, you will also need to pay an interest on that amount. If you can't pay the loan by the end of the payment period, then you can roll over the loan to the next month. However, this rollover will trigger a hike in the interest. If you continue to owe more and more money, it could be difficult to pull yourself out of a pink slip loan. Therefore, make sure you have a solid understanding of what's expected of you before you agree to the terms of the loan.
What is your plan for repayment of the loan?
Pink slip loans have a fixed period during which you must pay back the loan. Starting with the assumption that you don't have the money - which is why you are requesting the loan in the first place - think logistically about how you will obtain money to repay it by the end of the repayment period. You don't want to get caught in a vicious cycle of taking further loans to pay off existing ones.
Do you know what would happen if you default on the loan?
If you cannot pay back the pink slip loan, the lender will take your car and try to sell it. In some states, he can even keep the profit from the sale of the car. Thus, the lender will benefit when you default on your loan. You will be without a car because of a loan that you voluntarily requested.
Alisha Delphi holds a degree in Economics and Commerce from USC. She started out as a financial advisor with a bank and has moved on to become a loan consultant with more than ten years of experience. Apply for auto title loans application now.