So you’re broke and in need of quick cash. While browsing the internet, you come across many sites offering “fast cash”. Unfortunately, you know you won’t qualify for most of them due to your credit score. Then the words “no credit checks” and “car title loans” pop up. This seems like an answer to your prayers but it’s not!
A title loan may seem like a good idea when you need instant cash but I can almost guarantee you it’s not. Thanks to sneaky lenders and their unethical marketing practices, there are tons of lies being spread around the internet and if you believe them, you’ll find yourself in a financial trap. In fact, car title loans are one of the most expensive kinds of loans one can get. It falls under the category of predatory lending as creditors target consumers who are in desperate need of cash and are willing to pay high prices to get it.
Worst of all, title lenders are in the business of repossession. To secure a car title loan, you must offer up your vehicle title as collateral. In case of non-repayment, the lender has the right to repossess your collateral. In some cases, lenders even install a GPS device so that they can repossess the vehicle whenever they want to.
The True Cost of Title Loans
Most title lenders charge over 25% interest per month on the loan. This accumulates to 300% per year. Even credit cards do not charge this much in interest. There are also hidden fees associated with auto title loans. Lenders that offer title loans near me are notorious for adding on fees for insurance, application, termination, and even prepayment. The list of fees doesn’t stop there. Other fees include document fees, processing fees, origination fees and late fees. Most fees are legal in nature but some may even impose illegal fees.
If that wasn’t bad enough, these predators structure your payment schedule in a way that forces you to renew the loan. Often times title lenders don’t allow you to pay your loan in increments. They require you to pay your loan in one payment. These types of payments are termed as balloon payments. In contrast to traditional loans, borrowers are obliged to pay the interest of loan every month and still at the end of term they owe full amount of loan. In a nutshell, it can cost the borrower a lot more than their actual amount of loan.
Unbeknownst to many consumers with poor credit, there are better options besides a title loan. There is a wide variety of personal loans available that can help you to acquire instant cash. However, it is important to look over the details and terms and conditions of every loan. Cash advances on credit card, paycheck cash advances from employer and small consumer loans are few example that can be of help.
The Bottom Line
Title loans are a costly and dangerous way to get quick cash. If your objective is to pay your debts then consider different alternatives rather than heading towards title loans. It may appear appealing in the beginning but it turns out to be dangerous in the long term.
Many consumers have reported title loans as a bait-and-switch gimmick that have impacted them negatively and put them further into debt rather than ease their problems. Although most borrowers do agree that title loans are somewhat helpful, it is the consensus that these loans end up costing more than any borrower could have imagined.
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