Car Title Loans: Desperate Times Call For Desperate Measures

Remember when you first heard of car title loans and thought to yourself that you will never need one? Whenever the economy suffers, so too does our pocketbook.  If you are in need of some quick cash you may be considering a car title loan.

Basically this is where a lender uses references such as the Kelly Blue Book among other sources to loan you money against the valuation of your vehicle.  This may or may not be the best road to take because there are some ins and outs you should be aware of when it comes to title loans.

A Cash Loan For Car Title May Not Be Legal In Your State

Some states have legislated that a car title loan fits into a category called predatory lending.    For instance, they are not legal in Florida but in neighboring Georgia there are lenders on almost every corner.  Well, that’s a little extreme, but it is a big business throughout Georgia.

The reason so many states outlaw car title loans, is primarily because the interest rates are so extremely high.  Don’t let the monthly interest rate fool you.  Let’s take for example a monthly interest rate of 27%.  The APR or annual percentage rate would be over 290% of the original loan against car title.  So in the short time frame of one year you would be paying back almost three times what you borrowed PLUS the original amount.

Payday Title Loans: A Rose by Any Other Name is Still a Rose

There are various ways different lenders refer to a car title loan.  Some choose to call it a loan against car title or a cash point car title loan.  They are also called payday title loans which are really payday loans with the title to your vehicle being held as collateral.

A payday loan in its simplest form is simply money borrowed to be paid back by direct debit from your checking account on the next pay date.  Payday loans for car titles also allow the lender to hold title to your car until the loan is paid in full.  Usually, the same payment arrangements are made to debit the payments from your checking account.

In essence, it really doesn’t matter what you call it.  The person or entity loaning you the money is holding title to your vehicle until such time that the loan and any interest, origination fees, etc. is paid in full. That is basically the whole idea behind car title loans.

Risky Business (No, We’re Not Talking About Tom Cruise)

Actually, if they are legal in your state, whether or not you choose to pursue a car title loan probably depends on your desperation level. Just be aware that there is a fair amount of risk involved.  If you miss payments and default on loans for car titles, the lenders have every right to come out with a wrecker, day or night, and seize your vehicle.

Also, it is wise to understand from the very beginning that the interest rates tend to be as high as legally allowed.  You will be paying a good deal more than you bargained for.  Although it is risky, if you truly need (not want!) money quickly, it may help you out of a bind in the short term.

Some lenders even offer 30 days same as cash options.  My advice would be to pay it off in full as quickly as possible to avoid all the high finance charges that are inherent in this type of loan.

The bottom line is simple. If you do not need money, then you should think twice about applying for car title loans. If you absolutely need some cash for a relatively short period of time, then these loans might be your savior. The fact is that nowadays you can get an online car title loan approved within hours of your application. And that means that you will get some money in your pocket in less than a day’s time.