A title loan is a type of short-term loan in which you pledge your car title as security in exchange for a loan. If you don’t pay back the loan promptly, the lender has the power to seize your automobile as payment.
The loan can be paid in one single payment, generally within 30 days, or in monthly instalments over a period of 3-6 months. Typically, a balloon payment is made after the loan period.
You may simply walk in with your car title and walk out with cash, since title loans do not need a credit check or evidence of income. Doesn’t it sound appealing? They aren’t, though! Here are a few reasons why you should avoid acquiring a title loan if you’re thinking about it as per the credit repair company.
You may lose your vehicle
This is exactly what it sounds like. Failure to repay a loan using your automobile as collateral gives the lender ownership of your vehicle. This implies that taking out a title loan puts you at a 20% danger of losing your automobile. How many elements of your life will this have an impact on?
You run the danger of raising your borrowing costs by up to three times your initial loan amount
The average annual percentage rate (APR) for title loans is 300 percent. The annual percentage rate (APR) is the amount of money that your loan will cost you if it is outstanding for a year. You can have your automobile repossessed or seek a roll-over if you are unable to pay your loan before the end of the loan term. A roll-over is a fee-based extension of the payment period.
You may have to keep rolling over your debt, since you now owe more money. If you, do it for a year, the total cost of the loan in interest and charges might reach 300 percent, or three times the amount you borrowed.
In conclusion
While taking out a title loan is a decision you may make on your own or with your family, it’s vital to examine the risks and rewards. There must be a compelling reason why title loans are prohibited in many states. Credit repair companies want you to make the best decision possible by being well-informed.
