Auto Title Loans
The struggling economy in the country has significantly impacted the financial security of many Americans. This widespread epidemic has compelled many to resort to desperate measures to obtain extra funds to cover their basic needs. As a result of the high demand for quick loans, new title loan companies have opened in nearly all metropolitan areas across the country. There are approximately 7700 auto title lenders located in 21 states.
Though it seems like an ideal way to get emergency money, many borrowers roll-over all or a portion of their loans, converting into long-term repayment contracts that charge high interests. Therefore, if the full amount of the loan is not paid within short period of time, interests continue to accrue as well as penalty fees. According to Trend Statistics
, a title loan in the amount of $1000 will, on average, accumulate $1200 in fees, including origination fees, lien fees and processing fees. Over a period of time, an individual may pay about eight times more than the principal balance.
Auto title loans are among the most popular ways to secure fast payday loans
. There are usually no credit checks or income requirements involved in these title loan contracts. A borrower uses his automobile as collateral, which provides a security measure for the lender. The average annual interest rate is about 300 percent. In the event of a default, the lender has the authority to repossess the vehicle to recover the balance. In 2016, approximately two million people used their vehicles as collateral for title loans, and 80 percent rolled over their loans into long-term contracts. Nearly one in six borrowers of auto title loans lose their vehicles due to repossession.
Many states, such as Texas, Alabama, New Hampshire and Montana, have implemented regulations specifically to place restrictions on interest rates and cap loan rates. Some lenders, however, use loopholes to get around the law. Other states, like Arizona, New York and New Jersey, have banned payday loans altogether. http://www.paydayloaninfo.org/state-information
Individuals looking to acquire auto title loans will benefit from gaining a clear understand of the stipulations involved in using their vehicles as collateral. The quick funds that one may require for short-term needs may not necessarily outweigh the financial penalties that come with securing a title loan.