How to Get the Best Auto Title Loansby Todd Bowerman
An auto title loan is usually a short-term loan that uses your car as collateral. In the event that you are unable to repay the loan, your car is repossessed by the agency that issued the loan. Title loans are considered predatory lending, as they often have astronomical interest rates and the penalty for nonpayment can cause a domino effect of financial hardship for the recipient. It is best to avoid these loans altogether, but if you have no other way of finding some extra cash in an emergency, there are some things to consider before signing on the dotted line.
Compare interest rates between different title loan locations. Interest on a title loan is often as high as 30%, meaning a $600 loan will end up costing you $780 by the end of the month. Checking with different lenders is one way to minimize the amount lost to interest on a short-term loan.
Consider the total cost of interest per month. If you are paying 30% interest each month on a $600 loan, you will have to pay at least $200 to cover the interest and make a dent in the principal balance. Look for the lowest possible monthly payment, if you are planning to extend the loan beyond 30 days.
Focus on your ability to pay back the loan. You need to develop a solid plan for coming up with the required payment before you accept the loan. Knowing what you can afford is critical in choosing the right loan product. Set a goal for paying your loan in 30, 60 or 90 days, and find the lender that is most affordable over that period of time.
Determine whether you can drive your vehicle during the time of the loan. Most title lenders allow you to keep the collateral; keeping your car allows you to keep working and earning the money you will need to pay off the debt.
- check Title loans come at a steep potential cost. If you are considering a title loan, think about the financial implications of losing your car before you move forward.
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