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Auto Title Loans
If you are looking for a short term personal loan, auto title loans can often be a good option for emergencies. I do not recommend however, get into a vicious cycle of repeatedly getting these types of loans. An auto title loan usually is no longer than 30 days. The problem with this is that if the owner can’t repay the debt, the lender will take the car and sell it to get the money back out of it.
The problems arise primarily with people who do not have the means to pay back the loan. The loans look attractive to people in desperate need of cash fast and with bad credit. Often it is the elderly and lower income people who are most often having problems.
There is no doubt that the car title lending industry is very lucrative. In fact, this business charges an extremely high interest rate it makes money from the reposition and resale of cars that people lose in the small time frame that they have for repayment.
This is not to say that this form of lending is always bad however it does need to be approached with caution. Some of the things that you need to remember when applying for car title loan include having clear title, regular employment, liability insurance, and to be at the same residence for more than six months. Generally the amounts loaned are between $601 and $2500. These lenders generally pick the $601 figure as a beginning loan amount because they can charge a higher interest rate.
Often, lenders will allow the debt to rollover another month if it is late for 30 days. The interest would be added to the principal amount, balooning the amount owed. Because the interest rates often are way too high, the borrower often pays back only the interest just to prevent losing the car. More times than not, it sets up a vicious cycle of borrowing to keep from losing the vehicle.
Auto title lenders will generally lend at a fraction of the cost of the original car value. However, the amount borrowed should not be higher than the fair market value of the car. The best way to find this out as a consumer is to look in any NADA or Kelley blue book to find out the real book value.
Like I said before, auto title lending has its place but please be sure that you understood the consequences of what you’re doing, and be sure that you know how you will be able to pay it back.
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