Car Title Loans: Short Term Fix With Long Term Expense?
A car title loan is usually a last resort for a consumer. The consumer may be desperate for quick cash, maybe too desperate, considering the high interest attached to these loans and the inevitable risk of losing their vehicle.
The use of the car title loan option is growing though, due to hard financial times. Consumers are cash strapped and are in need of instant cash and a car title loan may be the perfect answer. However, the risks of losing one of their most valuable assets are great. This type of loan is advertised as a quick fix to an emergency situation but the bigger emergency could be the loss of your vehicle.
Car title loans may put borrower in a perpetual debt cycle. They come with a balloon payment, high interest costs and fees, and the risk of repossession. This is all within a one month time period. Anyone considering one of these loans needs to feel absolutely confident that they can pay it back without hesitation.
Car title loan lenders require that the borrower have a free and clear title to the car and to turn over the title upon the signing of the loan. The lender decides how much the consumer can borrow after an evaluation and appraisal of the vehicle. The loan-to-value ratio is around 33%, making it a win-win situation for the lender if the borrower defaults.
Auto title loans usually carry an interest rate of anywhere from 2% to 25% for an average of 30 days. If you are unable to repay the loan within that 30 period, you may have the options of getting a rollover with the same interest rate. If you cannot make your payments, then your vehicle will be reprocessed. If you lose your vehicle, you can't go to work, risking falling behind on your other bills.
A car title loan is an alternative to a payday loan, but is a collateral loan with your vehicle being the collateral. The car title loan industry has been growing rapidly. Some states have issued legislation to put limits on lenders' ability to charge interest and fees. These states have placed caps on the interest allowed, other states have banned the lenders and others have no lending laws whatsoever.
Only 14 states have pending legislation. Without any legislation, it is difficult to regulate and count just how much theses car title lenders are making and how many people are in debt due to taking out these loans. There are more than 15,000 title loan lenders in the USA.
If states are allowing auto title loan lenders to operate, there needs to be stricter regulations enforced. Many of these lenders are skirting by legislations and finding loopholes. The credit industry has a very strong lobby, so it may be tough to enforce some laws. More politicians need to be involved in capping interest rates and rollovers, as well as the neighborhoods these lenders can and will operate in.
About the Author
Texas Auto Title Loan is a great option for those who need fast money. TATL is state regulated following all rules and regulations. Visit http://www.texasautotitleloan.com to find out more on title loans.
Tell others about
this page:
Comments? Questions? Email Here