You’ve heard people shooting down title loans, but you don’t know what to do. Your short on cash and have an urgent and unexpected bill to pay. You’re a couple weeks away from your paycheck, and you lack any savings. You’re not alone. In a 2016 Esquire study, they found 25% of the nation’s people have less than $100 in the bank. Here are reasons to carefully consider title loans and the alternatives to look at first.
Understanding How a Title Loan Works
You own your car outright and have a clean title in hand. You can go to a company offering title loans and borrow money against the equity in your car. Say the car you own is worth $4,000 and you need $3,000 to pay for well repairs, you could offer up the clean title to a title loan company and get the cash you need within a business day. In return, you guarantee to pay the amount borrowed plus fees/interest on the due date or forfeit your car to that title loan company. If you don’t pay, your car will be repossessed, so there is plenty of risk on your part.
Here’s where things get tricky. The interest charged by title loan companies is often extremely high. Few states have strict laws regulating how much interest is allowed. Some companies, especially those operating out of other countries, disobey what laws are in place. If your car is repossessed by a title loan company, you not only must pay any late fees and the original loan amount, you also may be required to pay storage, towing, and key replacement fees.
What Can You Do to Avoid Title Loans?
Before you even consider a title loan, exhaust every other avenue. Talk to your employer to see if you can cash in vacation or get an advance on your pay. Talk to family and friends about borrowing money until your next paycheck. Sell off unused items in your home. Explain your situation to the company to whom you own the unexpected money and see if they will wait for payment or allow you to pay a deposit and then the balance later. Some churches work with parishioners and help them get cash for unexpected bills.
If all else fails, research the title loan company carefully. Make sure you completely understand the terms. Ask to see their license and look for someone licensed by your state. Do not use a foreign company! Then carefully note when the title loan payment is due and how much is due and pay it back on or before the due date. Keep all loan documents. If something goes wrong, immediately contact legal aid in your area. Do not wait and hope the situation clears itself up!
