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What you should know about borrowing with your car

Is Borrowing With My Car the right option?

The reason we borrow is because we need or desire money. That goes without saying. However, depending on our individual circumstances, the cost of borrowing can be high.  This particular type of loan is commonly referred to as a car title loan.

The Truth about Rates

Whether it’s a bank or an angel investor, the same principles apply.  The best rates go to the lowest risk.  It’s what is known in the industry as a “Risk to Rate Ratio”.   An unsecured loan is looked at as a very high risk to ratio and the rates reflect that.  However when you bring an asset such as a vehicle into the equation, it demonstrates a sincerity to paying back the principle + interest.  As a result, the interest rate is much more appealing.

Bank verses SubPrime

Banks have shown they have a high aversion to risk.  This is where Sub Prime Lenders come into the picture.  A sub prime lender such as Prudent Financial reviews your over all situation and provides relief in the form of a loan based on your over all credit history and assets.  The bank will  almost always provide the lowest rates.  But when an institution such as a bank is holding out for the “perfect” customer, it leaves a lot of people out in the cold.  A sub prime lender appreciates that building relationships can be profitable over the long run.  The rates will be higher than a banks.  However it should be noted that sub prime rates vary greatly from lender to lender.

Say no to payday loans

Beware of a pay day loan

Since their inception, pay day loans have been easy to get.  But with that ease, comes a high price.  Interest rates are the highest that can legally be charged.  In many cases the effective compound rate approaches the legal maximum of 60%.  Given that the majority of payday loans  require a short payback period, the loans often result in additional loans to cover the charges of previous loans.  This creates a debt spiral that can be impossible to get out of, short of declaring bankruptcy or going into a proposal.

Does your loan report to the credit bureau?

A typical pay day loan does not report the payback history to the credit bureau. Given that most people are looking to put a tourniquet on the bleeding and reverse their credit past, this loan can often result in disaster for your over all credit health.  A company like Prudent Financial reports your positive payback history to the credit bureau.  The result?  Over time all your responsible efforts result in a lower “Risk to Rate” ratio and it allows lenders to give you lower rates.  Eventually those rates rival banks and allow you the luxury of making lenders compete more aggressively for your business.

But is a borrow with your car loan or car title loan a good move?

When circumstances require immediate money, a car title loan provides that solution in a timely fashion.  And when you borrow from a company like Prudent Financial, they approach your business with the over all relationship in mind.  That’s why they pioneered the Responsible Lender Pledge, requiring all loan officers to look throughly at a borrowers financial situation.  Money is lent based on the borrowers ability to pay it back over a realistic time period, so the borrower has the best opportunity of turning the loan into a credit rebuilding tool, as well as a loan.

You have questions? We have answers

Prudent Financial recognizes you have choices.  That’s why we assign a dedicated loan officer to your situation to ensure you get maximum attention and your questions are answered to the best of our abilities prior to your agreeing to a loan that may be offered.  Want to have a conversation?  Give us a call at 416.223.9300 or fill out a brief loan application to speed up the process.

 

Smart Money Club

Responsible Lender Pledge Prudent FinancialPrudent Financial has been providing lower credit score loans to the greater Toronto area since 1984.  Please feel free to join our Smart Money Club for free tips on making your money work harder for you.