Auto title loans can vary greatly from state to state, and also between title loan companies and lenders. Besides key terms like the interest rate, APR and length of the loan, title loans can also differ by being amortized loans or not.
Keep reading to get pointers that can help you identify if your auto title loan is amortizing, and also help you understand how amortization can impact your loan repayment
What is Loan Amortization?
Simply put, amortization refers to paying off of a debt over a period of time in regular installments, with a portion of the installment payment going towards both the principal (i.e. the amount you borrowed) and towards interest (i.e. the cost of borrowing).
The scheduled payment amounts are determined before the money is loaned, so borrowers can see exactly how much theyâll be paying over the life of the loan. Over time, as payments are made, the portion of the installment payment that goes towards the principal increases, and the portion that goes towards interest decreases, resulting in a full payoff of the loan by the end of the loan term â assuming that all payments are made on-time.
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What are the Benefits of Amortization?
The most obvious benefit of amortization is the fact that borrowers pay down the amount borrowed with each monthly payment. This can allow for a more manageable repayment process compared to non-amortizing loans. In addition, the amortization schedule or payment schedule can allow borrowers to see up-front exactly how much it will cost them to borrow money. Lastly, having a predictable schedule with equal or almost equal recurring payments can give borrowers peace of mind since they can plan their repayments based on a clear and predictable schedule.
Are Car Title Loans Amortized?
As mentioned above, auto title loans come in many different shapes and sizes, so itâs not possible to answer this question in general. Hereâs how you can find out if a car title loan approval youâve received is for an amortized loan or not:1
Review the loan agreement before signing
- Your loan is likely amortizing if you find some of the following:
- A repayment schedule that includes multiple equal or almost equal payments
- A breakdown of scheduled payments into a principal portion and fee portion
- Words like âInstallment Loanâ, âmonthly installment paymentâ or similar
- Your loan is likely not amortizing if you find some of the following:
- Only one scheduled payment
- A payment schedule with a final payment that is substantially larger than the other ones
- Words like âballoon paymentâ, âsingle payment loanâ, âinterest onlyâ or âfee only paymentâ
Ask the lender or loan servicer
- Ask the loan officer youâre working with to tell you if the title loan approval youâve been given is for an amortizing loan or not.1 Request for a payment schedule in advance of the loan contract.
Use an amortization calculator
- Plug the approved loan amount, loan term and interest rate into an amortization calculator, and see how the calculated amortizing payments match to your payment schedule.
Are Title Loans Serviced by LoanMart Amortizing?
Yes! Online car title loans serviced by LoanMart are amortizing loans based on the equity value of your car or truck. Whether you live in Arizona, Alabama, Oklahoma, Minnesota, Texas or any of the other states where title loans serviced by LoanMart are available, thereâs no need to worry about the downsides that come with non-amortizing loans!
