When people are in need, they usually turn to the one obvious solution to this problem: obtaining a loan. For regular employees, there are many sources for loans; bank loans and company loans, including payday loans are readily available for them. But for unemployed persons, or those with bad credit records, the only thing available is a cash loan for car title option, known as an auto title loan or car title loan.
Also known as a cash title loan, an auto title loan has only one requirement: ownership of a car with a clean title. In other words, a car that is fully paid, free of liens and encumbrances, and personally owned by the borrower. Except for the standard personal identity information, nothing else is required because the car’s value is the whole basis for granting the loan. Most cash loan for car title plans offer a loan of approximately 50% of the car’s resale value so don’t expect a whole lot of cash for pawning your car’s title.
Outrageous loan terms
Many desperate borrowers go to outrageous lengths to obtain the loan. Some have even been known agree to pay over 300% in interests. A witness is reported to have testified in a Congressional hearing about having paid twice the amount of the loan over a two-year period and still owed the full amount by the end of the period. The irony of the story was that the loan obtained was used to pay off the last installment on the car’s tag.
Handing over the keys
Aside from the standard procedure of surrendering the car’s title for the loan, many car title lenders also require a duplicate of the car keys which they use to repossess the car when the borrower cannot pay the loan. In theory, the agreement behind a cash loan for car title plan is a short term loan –anywhere from 2 weeks to 3 months. However, car title lenders are allowed by law to impose a ballooning interest rate whereby borrowers are allowed to pay only the interest accrued by the loan every month, provided that they pay the whole amount of the loan by the end of the period specified.
Rolling over the loan
By the end of the period, most borrowers, after having paid the interest and left with still having to pay the full amount, simply “roll over the loan”or sign a new contract to refinance the loan at the same interest rates. This is a practice that should be avoided, because it will cause runaway expenses that will make luxury travel and other possibilities such as private yacht charter impossible due to their expense. Over several years, after having refinanced the loan several times, the borrower could have paid over 400% of the loan in interests but still end up with having to pay for the whole amount of the loan capital.
No matter how attractive a quick cash loan for car title scheme is, borrowers should pay attention to the interest rates on the loan. Be especially vigilant of ballooning interest as described earlier. Respectable cash loan for car title lenders will normally offer 50% interest payable at a regular fixed rate.
Avoiding unfair loan terms
If your car title lender is offering you outrageous terms for the loan, get out of that situation. Although that shylock is not breaking any law, agreeing to those terms could cost you a whole lot of cash and ultimately, your car.
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