5 Steps to Securing a Car Title Loan and Enhancing Your Credit in Canada
The average credit score in Canada has taken a dip over the last few years. This is especially the case as more Canadians have found their pocketbooks strained. A poor or bad credit score can make it more difficult to qualify for a mortgage, credit card, or loan in Canada too.
If you have poor credit, you might be wondering what you can do to turn things around. A car title loan might be the answer. By following these five simple steps, you could get both the loan you need and a head start on rebuilding your credit.
1. Research Loan Providers in Your Area
Your first step to securing a loan might be conducting a Google search. The phrase “car title loans near me” should turn up some reputable lenders.
You’ll want to make sure the lender is in your area. For example, if you live in the Greater Toronto Area, you probably don’t want to deal with a lender in Ottawa or North Bay. Even if it is easy to secure a loan online, it’s better to deal with someone local.
Keep in mind that you’ll want to find a lender that has a good reputation with the people they’ve served. There are lots of lenders out there, but only some of them go the extra mile for their customers.
2. Apply for a Car Title Loan Online
Your next step will be to pick a couple of lenders and submit an application to them. Application forms are usually quick and easy to fill out. Many lenders allow you to apply for title loans online.
You might wonder if you meet the criteria for getting a title loan on your car. The good news is that it’s often much easier to get a title loan than other types of loans. Here’s what you need:
- A vehicle that you hold the title to, which means you own it outright
- Proof of your identity and age, such as a driver’s license
- Proof of income
- Proof of insurance for the vehicle
You may need to provide some supporting documents, like a bank statement. You may also need to provide evidence you’re not in bankruptcy.
The lender will also details about the vehicle. This helps them assess you for the loan amount. If you’re applying online, you’ll need to provide some photos of your vehicle.
If you fill the application out completely and correctly, the approval process is often smooth. The lender doesn’t check your credit history, so you can be approved in short order. With the use of e-transfers, you can even get your funds in just a couple days.
3. Make On-Time Payments
Car title loans are like other installment loans. Once you’ve taken it out, you’ll repay the lender in installments. You’ll probably have a set monthly payment.
Just the act of making this payment on time every month can help you improve your credit score. Making on-time payments is actually the single largest factor in your credit score.
One easy way to make sure you make on-time payments is to set up automatic withdrawals. Most car title lenders prefer this method, and they’ll usually ask you for an authorization form with your application.
What’s more is that car title loans are often manageable. You’ll have them for a shorter period of time than other, larger commitments.
These on-time payments also become part of your credit history. History is the second most important part of your credit score. The long-term nature of a title loan can be better for your score than other short-term products.
4. Use a Car Title Loan in Canada to Consolidate Debt
How else can a car title loan help you rebuild your credit score in Canada? You might actually be able to use it to help consolidate debt.
If you have loans that you’ve been unable to pay or you’ve missed payments on, then paying them off can help. Since you’ll just have one interest rate, the overall cost of the loan may be lower than if you have several loans.
Since it’s one payment, it’s also easier to keep track of due dates. You can make one larger payment. That’s often easier than making sure you always have enough funds in your bank account for several smaller loans that come out on different days.
Getting rid of the loans you’ve defaulted on can help your credit score. Paying off debt can sometimes help to improve your score.
Getting rid of “bad debts” certainly helps. Having a single loan may help with your credit usage ratio, and it may improve your credit mix as well. Both factors play a role in your credit score.
5. Get a Clean-Up on Your Credit Report
Once you’ve taken out the car title loan and you’ve paid off bad debts, you can take one more step to improve your credit score.
Call your credit bureau and ask them to remove old and outdated information. This may remove the bad debts. It can also remove accounts that you’ve closed, duplicate accounts, and other issues that can drag your credit score down.
You can also ask them to make sure the car title lender is reporting your payments. You should always double-check with the lender before getting the loan. The lender needs to report payments to the credit bureau for it to have any effect on your credit score.
Some lenders don’t report to credit bureaus. Do your research and be sure to steer clear of them. Getting a title loan with these lenders won’t help you repair your credit as much as you think.
Start Building a Better Credit Score Now
If you want to build a better credit score, then a car title loan could be exactly what you’re looking for. If you’re looking for a loan in Canada, then get in touch with the experts. Whether you want a car title loan or you’re interested in exploring other options, they can help you find a loan that fits!
With the right credit products, a better credit score is in the cards.