Millions of financially strapped consumers turn to auto title loans every year for help taking care of emergency expenses, unexpected costs and making ends meet. The payday loan lending industry has paved the way for short-term loans that provide quick cash to people with bad credit or no credit at all.
While payday loans and cash advances offer amounts ranging from $100-$1,000, auto title loans give the consumer the option to borrow as much as $5,000 to $10,000. That's a great deal of money when you only have one to three months to pay it back. Buyers beware: when thinking about taking out a high-risk auto title loan, consider these financial pitfalls before you sign on the dotted line:
*Having a lien placed on your vehicle- Once you have signed your loan papers, the lender will require that you hand over the "pink slip" or title to the automobile.
*These are short term loans! - Most auto title lenders want to be paid back within 30 days. Some grant you up to 60 days. Nevertheless, if you have not paid within the specified timeline, your loan will "roll over" and you will be charged high interest rates and fees. This can cause a vicious payment cycle where you find yourself only able to pay the minimum payment. This will cause your loan balance to increase quickly!
Auto title loans are not for everyone. They work for those consumers who are in the position to pay back what they borrowed when expected but for those who can't? It's best to stay away from borrowing against your car and find another way to get the funds you need.