Why Auto Title Loans Are A Rip-off

Ever hear how about the quick and easy money with a car title loan. Here is where the quick and easy comes in.  Bring in car and get a cash loan for car title.  Very few questions will be asked and you do not worry about credit history.  The car will be the collateral and the amount of the loan can be up to 50 percent of its value. Get an auto title loan, receive instant cash and keep the car.  How could it be any easier?  Be careful, appearances can be deceiving.

If a person pays the entire auto title loan on time, they will still be paying high fees and interest rates. Nevertheless, consider why auto title loans are a ripoff.    The problem is with the hidden fees and high interest rates on these types of loans.  Another problem, if a person cannot pay back the interest and loan then, usually, without warning the car is repossessed. The loans are normally made for 30 days and after 30 days, the interest accumulated must be paid.  If the full loan is not paid then the principle is rolled over into the next month and further interest accumulates.  A money draining cycle has begun.

Fees and interest make the loan predatory.  Most consumer credit agencies warn against using a car title loans as a form of credit. What happens is the loan starts with a 25 percent interest.  If the borrower rolls the loan over, by the time the year has ended the APR, annual percentage rate, becomes 300 to 500 percent.   Some of these fees seen in car title loans are for assessing the value of the car, for delinquency of payment (which can be very high) and for loan processing fees.   Always check the APR of the loan, it should be in the paperwork. Also, question any fees being charged because they can be high. This may save money.

Before making, any decisions about using an automobile title loan consider a few options.   Can a friend lend the money if there is no home equity loan or access to another credit line?   Think about cutting back on household expenses and see if budgeting can provide the money needed.  If the only way is working with an auto title loan, then shop around and see if there are lower fees and APRs.  There may be other answers so keep an open mind and try not to solely depend on the quick and easy.