There are a lot of misconceptions about how auto title loans work, and that is one of the reasons people are sometimes hesitant to pursue them. One misunderstanding some people have is that they will lose their vehicle if they use an auto title loan. While there is a risk of losing your car, you don't have to lose it. Here are a few vital details about auto title loans that you should understand that may help you realize how these loans work.

You Borrow Money Against the Title of the Car

An auto title loan offers a way to trade in the title of a vehicle for cash. The trade is temporary, though, which means you are not selling your car. You are borrowing money against the vehicle, and you must provide the lender with the title of your car to close the deal. The lender gives you cash for the title and holds the title for you. At this point, you still own the car, but you also owe money to the auto title loan lender. You can keep the vehicle in your possession and use it as normal, but you must remember that you owe this money. The loan will not go away until you settle it with the lender.

The Lender Takes Precautions for Protection of Risks

When you trade your title for cash, the lender will take precautions to protect the risks involved with the deal. One precaution is finding out who you are and where you live. You must provide proof of your current address for this purpose. Secondly, the lender may install a GPS in your vehicle. This system will remain in place until you repay the loan.

You Get the Car Back When You Pay the Balance

If you do not repay the loan when it is due, the lender can find you with the GPS. The lender can repossess your vehicle at this point. If this happens, you will lose the car due to non-payment of the debt. You can prevent this from occurring, though, by paying the balance you owe by the due date.

Auto title loans are easy to qualify for and offer quick approvals. If you ever experience a time when you need money now, this is a useful loan option to consider. You can find out more about the process by talking to a lender that issues auto title loans.