If you’ve been looking at your loan options online, one term that may have come up is a cash advance for pink slip. This is essentially a synonym for a car title loan. But how exactly do car title loans work? And where did the term cash advance for pink slip come from? The following article will break it down for you and explain if getting a title loan is the right call for your situation.
What Is a Title Loan?
First and foremost, you probably want to know if a title loan is going to fit your needs. Title loans are short-term loans taken out against the value of your car. Since you put up your car as the collateral on the loan, these are secured loans, but the lender won’t have your car during the loan’s repayment period. The only piece of property you provide to the lender is your car title, which you get back upon repayment.
One of the biggest title loan benefits is the application process. Not only is it very fast, but there are few minimum requirements that you’ll need to meet. Here’s how you would apply for a title loan:
1. Find a title loan company in your area, which we can also handle for us if you fill out our online application
2. Go to the title loan company’s office and fill out the required loan paperwork
3. Allow the title loan company to perform a brief inspection of your car
4. Hand over your car title and receive your loan
Sound easy? It is, and the entire process, from the moment you walk into a title loan company’s office to the moment you leave with your money, is often finished in an hour or less.
What kind of requirements are there to get a title loan? You’ll need to be at least 18 years old to satisfy federal law, and to verify this, you’ll likely need to show the lender your government-issued ID. You need to have a car and a title that you can provide to the lender over the term of the loan.
There aren’t any specific requirements regarding your car. Even if it’s an older vehicle, old car title loans are an option. What matters is the value, and the title loan company will assess that using a vehicle value guide, such as Kelley Blue Book, and that in-person inspection. This allows them to come up with a current market value for your car.
You can expect a typical lender to set your maximum loan amount at anywhere between 25 to 50 percent of what your car is currently worth, to protect them in case you default on the loan. Some states also put their own regulations capping title loan amounts, although Texas isn’t one of them.
Does the Car Need to Be Paid Off?
Now, many potential title loan borrowers wonder if they can get a title loan when they are still financing their car. This will depend on the lender, but it can be an option in some cases.
For a typical title loan, you need to own the car and have a lien-free title for it. Closely related to the title loan is the auto equity loan, which is a loan based on how much equity you have in the car. This means that you likely won’t be able to obtain an auto equity loan if your car has depreciated faster than you have paid it off.
The process for getting the loan is still the same, and the loan will work the same way. The main difference will be in the amount you can borrow. The title loan company will still calculate the current market value of your car, but this time, they’ll also compare how much the car is worth with how much you’ve paid off. They’ll then base the amount they can loan you on your current auto equity.
Why Is It Sometimes Called a Cash Advance for Pink Slip?
Although the most common terms for this type of loan are either “title loan” or “car title loan,” some companies still occasionally through other terms out there. The cash advance for pink slip is a basic description of the type of loan you’re getting.
The title loan company is advancing you a certain amount of cash based on the value of your car. In exchange, you’re handing over your car title, which has been called a pink slip in the past. Until the late 1980s, car titles in California were pink in color, which is where the term originated from. They’re no longer that color, but the term has persisted.
What Happens After You Get a Title Loan?
Once you get a title loan, where the money goes is entirely your call. People typically put their title loans for financial emergencies that they can’t pay on their own, such as vehicle breakdowns, home repairs or a temporary loss of income. These are only a few options, though, and the title loan company doesn’t restrict how you can spend the money.
In almost every state, the standard title loan term will last 30 days. There are a few states here and there with laws that require longer title loan terms, but Texas doesn’t. You must pay the balance on your title loan, including the loan principal along with any interest or fees, by the end of the term.
If you’re unable to do that, you can renew your loan for a new term. This is done by paying off any interest and fees you currently owe, and the new term will have additional interest and fees. The loan obviously costs you more this way, but it’s better than not paying and defaulting on the loan.
Many states set limits on how many times you can extend a title loan. In Texas, the limit for title loan contracts is 180 days, which means that on a 30-day term, you can renew your loan a maximum of five times.
Defaulting on a loan enables the lender to repossess your car, and after that they’ll sell it to cover what you owed. To avoid this, make sure you notify your lender if you’re having any trouble making your payment. They can likely renew the loan for you and lower your payment for the current term, but if you don’t let them know, they could end up treating it as a default and repossessing your car.
Paying Off Your Cash Advance
Title loans are a very convenient option, especially considering you’ll keep your car while you’re paying it back. You won’t need to worry about taking the bus anywhere or bumming rides off people you know.
Just remember that a title loan is designed as a short-term loan that you use in emergencies. Have a plan to pay off everything you owe by the due date so you aren’t stuck paying extra interest and fees. When used correctly, title loans are the perfect option in times of need.