Will That High Interest Loan Cost You Your Car?
The economic times we are facing due to the COVID-19 pandemic may force you to seek relief in ways you would normally avoid. But before you turn to title pawn companies to supply cash to ride out this unsure climate, it is important to explore all of your options.
It’s important to understand the title loan process. If you are short on cash and own your car, it can be tempting to take out a car title loan. Even though this can be a fast way to get money, it can actually lead to more problems and cost you more than you initially believed. To get a title loan, you have to have equity in your car. Many lenders require you to own your car free and clear. Once you are approved, you give the lender the title to your car. Loan terms are generally between 15-30 days.
Problems With Title Loans
The main problem with this type of loan is the amount required to pay it off. Most companies charge an annual percentage rate (APR) of 300%. And the total cost of pay back will include additional fees as well. Title loans can also lead to a debt cycle that is difficult to escape. If you are not able to pay back the loan at the end of the term, the company may give you the option to roll over the loan, which increases the amount you will owe at the end of the new term. If you are unable to pay off the loan, your car will be at risk of repossession. A study from the Consumer Finance Protection Bureau states that people who roll over their loans are at increased risk of facing repossession.
Alternatives to Title Loans
There are ways to avoid using these high interest loans. Call your creditors and negotiate reduced payments for a period of time. Consider applying for an unsecured personal loan, use your tax refund to catch up on bills or ask friends or family to help out.
We all face difficulties with our finances from time to time. If you find yourself in a situation that seems dire, the office of Gingold & Gingold can help. Visit us here to schedule a free consultation. We can explain bankruptcy options available to you. You don’t have to face uncertain times alone. We look forward to helping you.