People in tough economic times may need to turn to loans to help make ends meet or to get some short-term cash. Having little or no credit may force people to look to other means of getting a loan. If that person owns a car or truck, they may try to get online car title loans to get the money they need. But there are some pitfalls the borrower should be aware of.
What are car title loans? These are loans that are secured by the value of your car. Typically they are for small amount of $250 to $750, but some lenders will loan up to $5,000. These are also known as auto collateral loans. You are using your car as collateral for the loan. This means if you fail to make the payments on the loan and default on it, the lender may then repossess your vehicle. In fact when you close on the loan, you are often required to give the lender a spare set of your car keys in case they need to repossess the car.
The problems with these loans are the high interest rates you must pay on the loan. In some states the interest charges can be as high as 30% a month. Some states are now starting to crack down on the rates charged in hopes of lowering them and making them more affordable.
The way a car title loan works is that you will have to make a payment of interest after 15 days. You will be paying interest on the loan every 15 until the loan is paid off. This can lead to the borrower getting on a never-ending schedule of paying high interest charges every month and not paying the loan off.
There can be a time and place to use car title loans. If you are looking into these be very aware of the high rates and the possibility of losing your car to the ender if you fail to make payments. Tread carefully with these loans.
