Car Title Loan

Car Title Loan

Car Title Loan
When you​ need money,​ often times the​ need is​ immediate .​
Finance companies sometimes offer an​ easy way out of​ financial problems by offering a​ car title loan .​
Unfortunately,​ clients are misled by the​ quick money that a​ car title loan offers.
Tagged as​ abusive,​ car title loans charge extremely high interest rates of​ up to​ 360% .​
To receive a​ car title loan,​ the​ consumer must sign over their car title as​ collateral .​
Set up as​ open-ended credit,​ car title loans are not subject to​ an​ interest rate limit or​ a​ maturity date.
So how does one get to​ have a​ car title loan? It’s simple .​
a​ customer enters the​ finance office to​ apply for a​ car title loan and is​ asked how much money they would like to​ borrow .​
With no credit check and no delay,​ the​ borrower can obtain a​ loan by exchanging their car title and an​ extra set of​ keys to​ their vehicle as​ collateral .​
The loans are typically less than $1,​000 .​
The borrower then makes the​ first payment after 15 days and then every 30 days thereafter .​
The borrower pays one percent interest per day and must pay a​ minimum of​ ten percent of​ the​ loan principal with each payment,​ excluding the​ first payment.

Every car title loan has an​ annual percentage rate of​ up to​ 360% .​
While the​ car title loan can be paid off early with no penalty,​ the​ vehicle can be repossessed with one missed payment .​
Unfortunately,​ many borrowers are losing their transportation because of​ this.
This Secured lending is​ supposed to​ be cheaper for borrowers than unsecured lending because the​ lender can look to​ collateral in​ the​ event of​ default .​
That security means that it​ is​ a​ kind of​ lending that is​ in​ a​ vastly different category than payday loans – and should not be compared to​ it .​

The car title lenders have avoided interest rate limitations by structuring the​ debt as​ open-ended credit,​ like credit cards .​
Open-end credit was deregulated because federal law let out-of-state card issuers export their no-cap law .​
the​ legislature has never decided that secured,​ small loans should be deregulated.
Most secure title loans are charging a​ much higher interest rate than unsecured credit cards .​
Credit cards are unsecured,​ and therefore more risky than secured loans .​
Despite the​ greater risk,​ the​ current average interest rate charged by credit card companies is​ 12.5% .​
Yet car title loans which are secured by cars which are owned free and clear by the​ title loan borrowers,​ are being charged rates that are 29 times the​ rate being charged on​ credit cards .​
Due to​ astronomical annual percentage rates and because of​ the​ high repossession rate,​ the​ first payment on​ these loans is​ due a​ scant 15 days after borrowing the​ money .​
Failure to​ make the​ first payment of​ your car title loan,​ or​ any one payment thereafter results in​ repossession .​
While no data is​ currently available on​ repossessions of​ cars,​ at​ one auction house,​ over 150 vehicles have been sold after being repossessed .​

There is​ also the​ loss of​ equity .​
For example,​ for many Iowans their car is​ their most valuable asset .​
Car title loans put this asset at​ risk and Iowans are losing all of​ their equity to​ the​ astronomical interest rates .​
For the​ unfortunate clients who lose their car to​ repossession any excess equity they may have built is​ eaten by the​ repossession costs and interest rate charges .​
The financial emergency that necessitated the​ desperate car title loan for these consumers is​ rarely as​ short-lived as​ the​ loan terms,​ so the​ interest quickly mounts as​ paying the​ loan off with a​ balloon payment is​ commonly impossible .​
It will appear that in​ a​ car title loan,​ you​ won’t be able to​ escape at​ all.
Here are some guiding principles from an​ affordable loan term .​
These should keep you​ away from car title loans as​ well:
•Establish Fair and Affordable Loan Terms .​
Title-secured loans should be repayable in​ affordable installments rather than a​ lump sum .​
is​ your car title loan like this? Rates should be limited,​ and lenders should be required to​ consider the​ borrower’s ability to​ repay
•Protect Borrowers After a​ Default .​
States should bar abusive practices such as​ seizing cars without notice,​ pocketing the​ difference between the​ sales price and what the​ borrower owes or​ pursuing the​ borrower for even more money after repossessing the​ car.
•Close Loopholes to​ Ensure Consistent Regulation .​
States that permit title lending should close loopholes that exempt some loans from the​ law and ensure that laws apply to​ all lenders,​ including those operating across state lines.
•Monitor Lenders Better .​
States should closely monitor lenders through strong licensing,​ bonding,​ reporting and examination requirements.
•Ensure Borrowers Can Exercise Their Rights .​
Car title loan borrowers should be able to​ sue title lenders and void contracts that violate the​ law .​
Binding mandatory arbitration clauses that deny borrowers a​ fair chance to​ challenge abuses in​ court should be eradicated.

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