Title Loans: Risk, Rollover, and Repo

A title loan is a form of pawn. You borrow money and agree that if you skip out on the loan, you will give up your car. The loan, and all of the interest and fees, is due in one payment. Title lenders will happily let you roll the loan over for another term, because then they can collect even more in interest and fees. If you don’t pay, your car can be repossessed.

There’s nothing new about auto lenders trying to get cars back. When the 1984 movie Repo Man was made, the lenders held the actual title of the car. If the borrower didn’t pay, they would send people out to find the cars and bring them back to the lender.

Now, you rarely have to turn the title over. That way, no one will know that you borrowed the money. However, you are not in the clear. The lender will make a copy of the title, and then, a GPS with a kill switch will be installed.

This means that the lender will be able to tell where you take the car. It can shut the car down so that you can’t drive it. You may not be able to get home from wherever you are.

This is a serious problem. The Consumer Financial Protection Bureau found that one in every five title loan borrowers ends up having their car disabled. That’s a lot of people who can’t get to work or to the doctor. (A quick web search shows a lot of advice about how to disable the devices, but the lenders are on to that. If the tracker is disconnected, then the lender will be notified, and it might put you into immediate default on the loan.)

In addition, the CFPB found that about 80 percent of title loan borrowers can’t pay off the loan for their initial term. They have to roll the loan over, increasing the payment and fees due. On average, the CFPB found that an auto title loan is rolled over four times before it is finally paid off.

What about all those advertisements about getting your title back? They are completely irrelevant.

The bottom line is that a title loan is really risky. If you can’t pay it back, you can lose the use of your car, and that will interfere with your ability to make enough money to pay off the loan. Most title loan borrowers already have a problem with repayment, even if they don’t lose their car. On top of that, the interest and fees are really high, especially given that the car can be used to guarantee the loan. These are best avoided no matter what.

What about all those advertisements about getting your title back? They are completely irrelevant.

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OppLoans is the nation’s leading socially-responsible online lender and one of the fastest-growing organizations in the FinTech space today. Embracing a character-driven approach to modern finance, we emphatically believe all borrowers deserve a dignified alternative to payday lending. Currently rated 5/5 stars on Google and LendingTree, OppLoans is redefining online lending through caring service for our customers.