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Entry bubble The Truth About Car Title Loans

By: Editor | August 11, 2009 | Category: Money

money in mousetrapWe 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:

HUD - Predatory Lending Practices

USA.Gov 

St. Louis Federal Reserve Bank

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

| View Comments [8] | envelope E-mail This Entry | Tags: auto   car   car_title   car_title_loan   loan   money   repossess  

Comments (8):

blue comment bubble Posted by Lori Ann on August 11, 2009 at 07:55 AM EDT

I had an aquaintance who took out a car title loan about 5 months ago. She used me as a refernce without my permission. As occurs,she became delinquent with the payment and her car that was just purchased for her as a gift by her parents almost a year ago was reposesed. Before they reposesed her car they called me every few hours on my cell and work phone in an effort to get the money she owed them and to repeatedly tell me taht they were sending someone to reposes the car and all items that were personal needed to be removed.
This was incumbersome on myself and my employer. I feel that when someone refrences your name the creditor should call immediately to verify (before the customer leaves).
For a $250 tittle loan my aquaintance's grandma ended up paying over $1,000. For the initial loan, interest and repo fees (which included an hourly wage for the person getting the car, mileage and hook up for towing as well as the cost for someone to clean our her car and vacume it). Her car was ready to go to auction the same day. These people do not mess around.
She was fortunate that her family was there for her. Too bad she did not talk to them first instead of using the title loan.

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blue comment bubble Posted by former debt collector on August 11, 2009 at 12:43 PM EDT

Lori Ann,
you should consult the Fair Debt Collection Practices act, you might have a claim against the company. Look into it or file a complaint with your state attorney general.

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blue comment bubble Posted by Sarah on August 11, 2009 at 02:52 PM EDT

Useful content thanks!, anyway lonas from banks have never been solutions...;)

Cheers,

http://2improveeyesight.info

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blue comment bubble Posted by discount auto parts on August 17, 2009 at 09:09 AM EDT

I have learned so much about your article. Thanks for the post!

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blue comment bubble Posted by olique estefan on September 04, 2009 at 01:13 AM EDT

You inspired me to be a blogger, thank you for that
This is a very touching blog, If I only could have had an idea I wish I had read the material on here sooner. Thanks for sharing everything this is a very nice blog

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blue comment bubble Posted by discount auto parts on September 04, 2009 at 09:13 AM EDT

this is an interesting topic! thanks for the post.

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blue comment bubble Posted by Susan on September 10, 2009 at 03:48 AM EDT

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Susan

http://pay-dayadvance.net

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blue comment bubble Posted by Lissy on September 23, 2009 at 01:23 PM EDT

I have a friend that took a car title loan and is now about to lose his car because he can't keep up with the payments any one have any suggestions as to what he might be able to do to keep the car thats his only means of getting around and if he loses his car he loses everything because he wont be able to get to work. He Lives in a country area so the bus is out and a cab wont go out that far. These car title loans are a bad thing. I mean my friends car is worth 8,000 and he only borrowed 1000 so if they resell it they make 7000 off of him and from what I have read here online they may charge him still more money in repo fees and such again can anyone give me a suggestion on what he can do he doesnt have internet access so I am trying to help in anyway I can so he doesnt lose his only means getting around. So, again can anyone help me here to help him???

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