Steering Clear of Title Loans (2 of 3): Don’t Risk Your Ride
Are you a risk-taker? You may skydive, ski the side of a volcano, or run with the bulls in Pamplona while blindfolded for fun, but there’s one risk that’s never worth taking. Car Title Loans aren’t just risky, their flat-out wrong. Check out the top 3 Risks of title loans and steer clear of these dangers.
Risk 1: Owing more than you can afford
There are socially-responsible lenders out there, but they never offer title loans (sometimes called Car Equity Loans). Car title loan sharks are predatory lenders who prey on those in need. They succeed by trapping borrowers in loans with unfairly high interest rates.
Car Title Loan interest rates are higher than credit cards, personal installment loans and most other forms of borrowing. The median Car Title Loan amount is $951, and the median car value is $3,150. While the average interest rate is 25% on your loan, that equals a stunning 300% APR (compare that to 15% average credit card interest). Borrowers wind up at risk of paying the value of their loan multiple times over.
Risk 2: Rollover (and over, and over, and over)
So the debt trap has been sprung. You took out the loan, now you can’t repay the principal, the interest and all of the extra fees. What happens next? Before the lender takes your car, they’ll offer you what’s called “rollover.” This is basically an offer to extend the term of your loan for another period (two weeks or a month)—at the cost of additional fees and interest.
Rollover seems like a quick fix but it actually just makes the problem much worse, here’s how: Rollover compounds the problem because now you owe more to the lender on top of what you couldn’t afford to repay in the first place. It can become impossible to pay the mounting debt, in which case you’ll find yourself…
Risk 3: Losing your car!
This is the worst case scenario for the borrower, but it’s actually the lender’s intended outcome. Nationally, 11% of borrowers lose their cars to car title lenders. In New Mexico, the number is a frightening 60%.
Lenders want your loans to fail. How can you tell? Many will install GPS tracking devices or starter interrupt devices on the cars that secure these loans. When they do “repossess” the car, they’ll sell it to recoup their losses. Some states mandate that the lender return the cash difference between the debt principal and the sale price of the car to the borrower, but other states don’t. So imagine taking your original financial crunch (a surprise medical bill, a home repair, etc.) and now making it infinitely worse because you owe many times the value of your car to a title lender, and then to top it off, you even lose your vehicle (read more in Title Loans: Risk, Rollover, and Repo)!
If you need fast cash in an emergency, you don’t have to resort to a title loan. There are better alternatives. A personal installment loan from OppLoans comes with a fixed interest rate that’s 70-125% lower than other personal lenders. And if you’re approved, you can receive your cash loan as soon as the next business day. Skip the risk of a title loan and make a safe decision with OppLoans.
 Giusti Cafiero, Autumn. “The Consumer Perils of a Car Title Loan.” Bankrate.com. https://www.bankrate.com/finance/auto/consumer-perils-car-title-loan.aspx. Accessed 5.6.16.
 “Car Title Loans” Consumer.ftc.gov. https://www.consumer.ftc.gov/articles/0514-car-title-loans Accessed 5.6.16.