Before proceeding with an auto title loan, or any kind of loan, it’s crucial to contemplate if you can handle it in the long term. Some individuals might hastily plunge into a car title loan, neglecting to devise a repayment strategy. These people may end up in a worse situation than before they even took out the loan. The lender can seize ownership of your car if you fail to repay the loan, leading to complications in commuting and performing everyday tasks.
So, why opt for a car title loan at all?
The majority of people turn to auto title loans during emergencies, given the simplicity of acquiring them. Individuals with poor credit will also gravitate towards such loans, considering that traditional lenders like banks could be unattainable due to stringent borrowing rules. With a car title loan, you get cash in exchange for signing over your paid-for-car’s title as loan security. There are negligible income verifications and no credit checks when agreeing to a title loan, making it incredibly accessible for car owners.
However, there are certain issues with auto title loans.
Even though the procedure appears quite simple, borrowing from auto title lenders could lead to the loss of your car and significant financial distress. High-interest rates constitute another significant concern with auto title loans. Compared to credit card interest rates, those on auto title loans are strikingly higher. Auto title lenders manage to circumvent usury laws, thus charging astronomical annual percentage rates (APRs) that go up to 250% – over ten times the interest rates levied by credit card companies.
If you’re consistently poor at managing finances and lack the expertise to devise a savings and repayment plan, auto title loans could be a risky venture. Failure to repay the loan gives the lender the lawful right to acquire your car, as per the agreement you signed.
All these factors have led many to label car title loans as “predatory lending”. However, if you wish to use a title loan responsibly, it’s essential to have a repayment strategy set at the outset or be prepared to pay the interest and roll the loan over for another term. Adopt a feasible repayment plan, and you’ll have a reliable title loan lender on your side.
