There are some people who find themselves in financial dire straits. And when they do, they think the only way to get emergency money is to take out a title loan. Title loans let you borrow money against your vehicle, as long as it has been paid for in full. The amount you get for your loan will depend on what your vehicle is valued at. Sadly lenders know that most people who take out title loans are in financial trouble and they take advantage of this fact and they charge the poorest people the highest interest rates and fees. Rates that they wouldn’t dream of charging to people who are better off.
When you apply for car title loans the lender will check over your car or truck and give it a value. This value dictates the amount of loan that they give you. Generally, they will lend you between 20% and 50% of the value of the car. They will also take into account your credit history, the better your credit rating, the higher the loan you get will be. Lenders will only give out this small percentage to the borrower so that they have a better chance of recouping their money if the loan is not repaid.
Title loans really should be the very last resort, because of the huge interest rates there is a chance that the loan will never be paid back, or if it does it will take many years. On average the APR on these loans can be about 300% and it can go as high as 500%. Plus there are also so many fees and hidden fees that they will charge you, like processing fees, origination fees, as well as a fee for installing a kill start switch in your vehicle and any other fees that they are able to charge you that are within the law.
The lenders install the kill switch into the vehicle so that if you miss any payments they are able to stop you using your car or truck. This means if you are at the shops, at work or even in the middle of nowhere you will not be able to use your car. Some lenders will give you a grace period of a day or two just in case there is something wrong with your bank and they haven’t made the payment for some reason, but there are some that won’t give you this grace period, and leave you stranded right away. Not only could you be stranded in the middle of nowhere, but it could also leave you unable to get to your work, meaning you have no more income and making your situation even worse. This is why auto title loans should be avoided at all costs.
If for some reason you are unable to make any repayments this will result in you paying even more fees, in some cases it can lead to dates in court, after you have paid these late fees and court fees you could end up paying a lot more than the loan is actually worth. Added to that the lender can seize your car and sell it on for its full value and keep all of the profit they make. So not only do you lose your car, but you are also heavily out of pocket because of all the extra fees. Many companies can get away with this because of slack regulations regarding title loans in many states.
If you manage to get yourself a decent lender then they may let you skip some payments if you have a good reason for doing so, though you will have to make the arrangements for such a thing well in advance. Again you can incur even more fees, called “roll-over fees”, plus a late payment fee. Some lenders will also make you pay off the interest for that month’s loan and let you away with not paying back the loan itself. This again is not ideal, you pay more fees, the loan costs you more money and it also takes you longer to pay the loan back.
I hope that after reading this you realize that car title loans are to be avoided at all costs. Especially if you are currently in financial trouble as you will end up even worse off after you have taken the loan out. Even if you are desperate for emergency money you should be avoiding these loans. There are so many other loan options out there that you can take advantage of, no matter what your credit rating is like there will be a better option for you. Plus you can keep your car, make it into work and hopefully, over time get out of your financial strife.
If for whatever reason, you decide you want to take out one of these loans, online title loans are the best ones to look at – even the best aren’t that great – there are many lenders for you to compare and hopefully you will be able to pick out the best of the bunch.