Considering a Title Loan?

If you were like most people, you have experienced a time where you seem to have more month than money, and a short-term infusion of cash would serve to reduce your current stress. There are a number of ways to secure a little extra cash. You could borrow from family or friends or you might be able to get a credit card advance or a short-term loan from your bank or Credit Union. Another option available is known as a car title loan. It is important that you research carefully to make sure this is a viable and positive option for you.

How Does a Title Loan Work?

A title loan is simply an agreement between a lender and a borrower where the lender promises a small amount of money for a short amount of time keeping the title of the car as collateral. If you are certain that you are only days from receiving a bonus or that you are only minutes away from your ship coming in, a title loan may be a consideration. You must remember that the title loan business is exactly that, a business and, from all indications, a very profitable one. To prove that to yourself, the next time you're out on a drive, look around and see how many of these businesses there are.

How Does the Title Loan Industry Make Money?

The steps to acquiring a car title loan are straightforward. It is simply a matter of completing an application and, after approval, the lender gives you a relatively small amount of money in exchange for your car title. When the loan becomes due, usually in 30 days, you pay the lender the amount borrowed plus a monthly fee. It must be noted that often this fee is substantial, sometimes equaling or exceeding the amount of money borrowed.

If at the end of 30 days you cannot repay the note, the lender may extend the opportunity to roll over the note an additional month. this extra month will come with yet another exorbitant monthly fee. If multiple rollovers are necessary, it may be that in the end you will owe the lender more than your car is actually worth, making the original idea of that short term loan a poor one indeed.

What Happens if the Note Cannot be Repaid?

Quite simply, you surrender your car to the lender. At this point, the lender will sell your car and will realize a tidy profit from the original $500 to $1,000 he first gave. Further, you are now out of a car with the possibility of having difficulty getting to work, and that difficulty may lead to your inability to pay anyone else you might owe money.

If you find yourself with more month than money and you are unable to find cash from the sources mentioned above, you may want to consider asking for extensions from the people you owe or maybe even paying them late. While a late payment might cause damage to your credit score, it wouldn't be nearly as damaging as a repossession.