When it comes to title loans in Utah, cars are the most popular collateral. However, these motor vehicles are not universally used. Many title lenders also accept trucks, trailers, motorcycles, all-terrain vehicles (ATVs), and snowmobiles to secure the debt.
Non-car title loans offer flexibility to more borrowers, but they are not without drawbacks. Since different rules may apply to them, it is imperative to understand what they truly are before applying for any of them. Below are the most important things you need to know about them.
Some of Them Are Actually Not Title Loans
Title loans are called as such because the lender only requires the title, not the vehicle, to be surrendered upon the release of funds. If you are not going to use a vehicle other than your car as a security for the loan, though, you may have to turn over your keys until you repay what you owe completely.
If this is the case, the non-car title loan is not really a title loan. If you are using your motorcycle for your daily commute, for instance, you may have to rely on public transportation and other means of mobility during loan repayment since your lender will likely hold it in their garage in the meantime.
They Are Usually More Affordable
If you are securing your loan with a non-car motor vehicle, you may be able to borrow more than 50% of its value. For example, some title lenders are willing to loan up to 75% of the value of a motorcycle or an ATV.
But since the average cost of cars is greater than that of other motor vehicles, you will likely access less money if you use non-car collateral. Nevertheless, you can still borrow thousands of dollars with interest less than the rates attached to signature loans.
Moreover, limited borrowing ability can help minimize your debt. Some of us like to borrow as much as we can needlessly. If you loan more than what you really need, you will deal with higher monthly payment and pay more money in interest. Smaller loans with less interest are always easier to repay.
They May Cause Less Harm to Your Credit
The relatively small size of non-car title loans will not increase your overall level of indebtedness, which is a prime factor in most FICO scores. They also make repayment less burdensome. Taking out one of them rather than a car title loan can help you build your credit more properly.
They May Offer Limited Payment Options
Some car title loans come with flexible payment solutions like an interest-only option. The same can’t be said about non-car programs. Often, they require the principal and interest to be included in the monthly payment to pay off the loan more quickly. Non-car motor vehicles are perceived to be riskier assets, so many lenders do not want to get paid in full ASAP.
Whatever motor vehicle you plan to use to secure a loan, make sure you exhaust all alternatives first. A title loan, regardless of the collateral, should be your last resort to keep your overall cost of borrowing to a minimum.