Cash Loans for Car Titles
There is a growing concern over the practice of making cash loans for car titles. The problem is mostly extremely high interest rates and short repayment times.
There has been a lot of criticism over the growth of the short term payday loan industry. These lenders specialize in very high interest and very short term loans. Critics claim these loans are a bit like fighting a fire by throwing gasoline on it. The need for the short term loan is usually a sudden cash flow emergency. The high interest rate and the claim on the proceeds of the borrower’s next paycheck only make the cash flow problem worst. Cash loans for car titles works much the same way.
The idea of the cash loans for car title lenders is that they will make a short term cash loan and take the clear and free title to your automobile as collateral. The interest rate for these loans will usually amount to about 25% per month or about a 300% annual interest rate. If a month payment is missed, the lender often pays a late night visit and picks up the car. Often a duplicate set of keys is a requirement of the loan.
States vary on their regulation of this type of loan. Some States have few regulatory laws at all. In Georgia, when the car is picked up and sold after a defaulted loan, the lender is allowed to keep the entire proceeds of the loan even if it exceeds the loan payoff amount. In many cases, the lender is counting on default. Many of the car title lenders operate car lots. It is easy to guess where the cars on the lot come from.
About the only thing that can be said in defense of the car title cash lenders is they are usually the place of last resort for desperate people with serious financial problems. If there was some other legal way to get the money to get them out of their problem, they would certainly do it. The cash for title lender may be taking advantage of the borrower, but on the other hand, they are not holding a gun to their heads either.
As economic conditions worsen and debt becomes a more serious problem, it is likely that the cash loan for car title business will continue to thrive. It is another example of the need to protect your credit rating at all times. You can be pretty certain that most people who are putting the titles to their cars up for small short term cash loans have bad credit. If they did not, other options would be open to them.