Imagine being stuck in a financial emergency without cash. Your first thought would be, if you have a car would be to use your car’s title to get a loan, right?
Don’t be in a rush. Think it over and find out what a title pawn truly entails.
It may seem lucrative or even cheaper, but auto title loans come with exorbitant interest rates that make it difficult for average borrowers to pay back on time.
The lending companies, therefore, make money on penalties and fees charged at the expense of the borrower.
Let’s dive in and see how they work
Chances are you’ve gotten yourself in financial difficulty and require quick cash at some point. It could an overdue house rent, a huge medical bill that can’t wait, or even a huge credit card bill that needs to be cleared.
A car title loan is a fast and easy way of getting the emergency loan you require without worrying about your credit scores and the lengthy credit checks done by banks before approving your loan request.
They are fairly simple to get. You only need to issue your car title to the lender as security, who’ll then lend you a loan amount that’s usually up to 50% of the assessed value of your car. The title remains in the lender’s custody until you have fully repaid the loan.
Title loans are usually short-term, and to avoid incurring more expenses, you should pay back the full loan amount in 30 days. If you default on payment, the lender may repossess your car and sell it to recover his money.
Requirements vary from lender to lender, the most basic are:
The biggest downside of title loans is the high and exorbitant interest rates.
Most lenders will charge you an interest rate of 25% to finance your loan which is equivalent to an APR of around 300%. So, let’s say you borrowed a loan of $500. You will end up paying $625 (an interest of $125 plus the principal of $500) within 30 days of taking the loan. Now, that’s way too high for an average borrower.
Most title and payday loan lenders prey on borrower’s vulnerability and in most cases, they’ll target borrowers who are less likely to repay their loans. They’ll then advice them to roll over their loans and each time the borrower rolls over their loan, the lender makes more profit on the fees and interest charged.
By the time the borrower finally pays up, he would have paid almost 3 times the amount borrowed. If he fails to pay, the lender simply sells the borrower’s car to recover their cash. In nutshell, most of these fly at night lenders are in business and give a damn about your financial well being.
With a careful plan, you can avoid title loans. Here are some strategies that can help:
The best way to develop a saving culture is to set aside the amount you want to save before spending. If you spend fast, chances are that you’ll have nothing to save.
Having some money in an emergency fund keeps you from borrowing when disaster strikes. Have a clear budget on how to use your money, and if you don’t know how to prepare one, you can talk to an expert who’ll take you through the process.
Credit counseling institutions can help you get back your finances on track and help you work on a budget that’ll help you clear your pending debts, and little by little, you’ll see your credit scores rise, making you eligible for bank loans. Also, avoid taking numerous short-term loans that you can’t pay on time. You could also use the services of a credit service organization to help improve your ratings.
Despite their availability, title loans can make your financial life even worse than it was before. They may be easy to get, but also very exorbitant. If you have to take them, use them only for short-term emergencies. Always have a smart plan on how you’ll pay up before using them.
For your lending needs, fill out our online application forms today and let us connect you to reputable lenders who will not take advantage of your vulnerability. We are a trustworthy loans matching company who are out to save you the headache of falling prey to predatory lenders.