Car Title Loan

There are situations in life when you need money imediately. A car title loan sometimes seems to be an easy way out of your financial problems but be aware that there are extremely high interest rates of up to 360% a year.

How can I get a car title loan?

Actually it is pretty simple: You tell your bank or finance company how much money you would like to borrow. You then get the loan in exchange for the car title and an extra set of keys to your vehicle as collateral. Normally you can't get more than $1.000 from a car title.

The first payment usually has to be made after 15 days and then every 30 days thereafter. Every car title loan has an annual percentage rate of up to 360%. If you miss to pay one single rate the vehicle can be repossessed. Because of this rule many people are loosing their ride through car title loans.

Why should a car title loan be the last thing to do?

Like stated above, the secure car title loans have an annual interest rate of up to 360% while other credit options like credit cards have annual interest rates between 10% and 20%. So if you have the chance to get a credit in a different way then use it. A car title loan should be the last thing to do, only if there is no other way.

There is also the loss of equity. For example, for most Iowans their vehicle is their most valuable asset. Car title loans put this asset at risk and Iowans are losing all of their equity to the astronomical interest rates. For the unfortunate clients who lose their auto to repossession any excess equity they may have built is eaten by the repossession costs and interest rate charges.

The "financial emergency" that necessitated the desperate car title loan for these consumers is rarely as short-lived as the loan terms, so the interest quickly mounts as paying the loan off with a balloon payment is commonly impossible. It will appear that in a car title loan, you won’t be able to escape at all.

Here are some guiding principles from an affordable loan term. These should keep you away from car title loans as well:

Establish Fair and Affordable Loan Terms. Title-secured loans should be repayable in affordable installments rather than a lump sum. Is your car title loan like this? Rates should be limited, and lenders should be required to consider the borrower’s ability to repay
Protect Borrowers After a Default. States should bar abusive practices such as seizing cars without notice, pocketing the difference between the sales price and what the borrower owes or pursuing the borrower for even more money after repossessing the car.
Close Loopholes to Ensure Consistent Regulation. States that permit title lending should close loopholes that exempt some loans from the law and ensure that laws apply to all lenders, including those operating across state lines.
Monitor Lenders Better. States should closely monitor lenders through strong licensing, bonding, reporting and examination requirements.
Ensure Borrowers Can Exercise Their Rights. Car title loan borrowers should be able to sue title lenders and void contracts that violate the law. Binding mandatory arbitration clauses that deny borrowers a fair chance to challenge abuses in court should be eradicated.

About the author:
Guido Nussbaum, Admin of Auto Loan Calculator
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