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Published On: Fri, Sep 23rd, 2016

Are car title loans a viable option for receiving fast cash?

“Cash in the value of your car!” “Get immediate cash!” “No credit check required!” Such ads for title loans make borrowing cash against the value of your car seem to be an ultimate solution to your mid-month financial woes. Are you in dire need of cash to make ends meet? What if you have a poor credit score which keeps you from accessing the other loan options from banks or credit unions? Taking out a car title loan is one of those ways in which you can get your hands on fast cash with no such credit check and minimum verification of income. Although this might seem to be a fair deal but more often than not, it has been seen that it can lead borrowers deep into debt and in some extreme situations, even without their car.

photo supplied/ bankruptcydocumentslibrary.com/

photo supplied/ bankruptcydocumentslibrary.com/

Car Title loans – How do they work?

If you take any of your valuables or other jewelry to a pawn shop or a lender, the employee on the other side of the counter would appraise the things and offer you a loan based on what you give them. In such a case, the pawn shop lender lends you money and charges interest. You will have the risk of forfeiting your items when you don’t repay the money on the agreed time. A car title loan works in a similar manner.

Here the lending company evaluates the price of your vehicle as based on its wholesale values and then he offers you a loan on what he thinks is the price of your car. Until you repay the loan, the lender holds on to the title of your car. This is a short-term loan with an outrageously high interest rate and when you’re not able to repay the money on time, you actually have to sell off your car by default to the lender.

Read the fine print – A word of caution

Driving your car to the lending company and accelerating the process of getting money may seem to be a simple process but before taking the plunge, you should know what you’re committing yourself to. Don’t forget to read the fine print.

  • How is the interest rate calculated? What is the time period during which the interest rate is calculated? For example, you may find a 3% interest okay until you read further to know that 3% per month will mean 36% in a year! Also keep in mind that title loan lenders aren’t subject to usury laws and hence they may charge you higher rates.
  • What are the penalties for non-payment and late payment? Could a single late payment cause your vehicle to be taken away? Does that even lead to an increase in the interest rate of your loan?

Car title loans are definitely one of the simplest ways of obtaining money when you need it on the double but don’t forget that they are not your only options. If you need immediate cash, you may also research for other options like personal loans, payday loans, and workplace emergency loans and you may even consider selling items which you don’t use any longer.

Author: Pankaj Deb

On the DISPATCH: Headlines  Local  Opinion

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