“Unlock the cash in your car!” “Get cash fast!” “No credit check needed!” The ads for auto title loans make borrowing against your car sound like a foolproof solution to your financial problems.
Not so fast. Auto title loans are actually a risky, expensive form of lending. Not only are interest rates sky high, but people who can’t repay their debt may have their car repossessed. Yet those negatives haven’t stopped the auto title loan industry from thriving, particularly by targeting consumers who live on the financial edge.
Here’s how a title loan works: A lender takes your car’s title as collateral for a short-term loan. Qualifying is usually easy – you just need to own the car outright. There are no credit or income checks and you may be able to get money in a matter of minutes. After a brief period (usually 30 days), the full amount borrowed must be repaid, plus any fees. If you can’t make the payment, the lender either takes the vehicle or offers you the chance to renew the loan, for an additional fee.