Millions of people utilize the services of a title auto loan to help ends meet. Payday loans have come under fire in recent years because of various shady dealings that allowed people to end up in deeper financial trouble than if they had used more conventional methods of borrowing money. Auto title loans are also utilized to procure funds to help with expenses. Auto title loan businesses lend people money and hold the title to the vehicle until the loan is paid in full. The amount of money that can be borrowed depends on the year, model and condition of the vehicle. Even the best auto title loans come with pitfalls, and here are four to avoid.
1. Lien Placed on Your Vehicle
As soon as the loan papers are signed, the borrower is required to hand over the title, and a lien is placed on the vehicle until the loan is paid in full. The borrower must prove to the DMV that the loan is satisfied before the lien is removed.
2. Teaser Interest rates
People who are desperate for financial help tend to apply for these teaser rates more readily than someone that has other avenues available to them. These teaser rates lure the borrower into taking out the loan, only to find out later that the monthly interest rate translates into an annual percentage rate upwards of 100 percent.
3. Very Short Term
The period to repay the loan is very short, usually 30 days. This lump sum payment of the principle and interest is usually very difficult to pay, and hence the amount rolls over. The borrower is offered an extension and pays interest only, and thus, the loan amount increases.
4. Repossession
In the event of missed or late payments, the loan company repossesses the vehicle and it quickly goes to auction.
Even though these title auto loan business are very popular, and have a useful place in our society, you should do your homework to ensure that you're getting the best auto title loans available.
