News From Our Blog

The Truth About Car Title Loans

We have another guest blogger today. Marietta Jelks is the editor of the General Services Administration’s Consumer Action Handbook.   

As editor of the Consumer Action Handbook , I was sickened to hear about car title loans, a form of predatory lending, because they prey on the most vulnerable and desperate consumers. In a title loan, a consumer in need of quick cash, will use their car title as collateral for a short term loan. No job or postdated checks required. Sounds simple enough, right? Wrong.

What the title lenders don’t say in their commercials is that you have to turn over your car title and keys when you get the loan. They’ll loan you a small fraction of the car value at sky high interest rates - as much as 25% for one month (300% APR)!! At the end of the month you are expected to pay the whole amount back, plus the exorbitant interest.

If you can’t pay the loan there are only two options. You could roll the loan over for another month, with more fees and interest. This generally leads to a dangerous cycle of borrowing and rolling over the loan amount. As the loan amount increases, it becomes almost impossible to pay the debt. The other option is for the company to repossess your car. Some companies even install GPS and starter interrupters when you take out the loan to make the repossession easier. Talk about customer service!

Unfortunately, there is no federal regulation of title loans now, but some states have put some rules in place to regulate the interest charged by these companies and investigate complaints against them. If you find yourself in a cash crunch, consider all of your options. Between family, non-profit organizations,  and Extension offices, there are solutions available.

For information on other predatory lending practices:

Let us know if you’ve ever had an experience with a car title loan.

We welcome your comments if you are 13 or older, and hope that our conversations here will be polite. You are responsible for the content of your comments.

We do not discriminate against any views, but may delete any of the following:

  • violent, obscene, profane, hateful, or racist comments
  • comments that threaten or harm the reputation of any person or organization
  • advertisements or solicitations of any kind
  • comments that suggest or encourage illegal activity
  • multiple off-topic posts or repetitive posts that are copied and pasted
  • personal information including, but not limited to, e-mail addresses, telephone numbers, mailing addresses, or identification numbers

In short: be nice and add to the discussion. If you continually violate this policy, we may limit your ability to comment in the future. If you have any questions or comments about this policy, please e-mail us.