5 Reasons Car Title Loans Should Be Avoided

Car title loans are often marketed as quick and easy solutions to an immediate financial need. The poor or lower middle class are the usual targets for these predatory lenders. Here are five facts that you should have before using a car title loan to solve your financial crisis.

  1. On average a person who borrows $500 from one of these companies will pay an additional $500 in interest in just six months.
  2. The average car title loan company will only allow you to borrow up to 25% of the value of your car.
  3. The average borrower must take out eight title loans in order to be free of the lender.
  4. Interest rates are typically 20-30 times more than credit card interest rates.
  5. The lender holds the title to your car as collateral and will repossess your car if you do not pay.

Car title loans are much more insidious than payday loans, since the loss of your vehicle can lead to unemployment. These institutions should be avoided at all costs. There is a reason that 31 states have banned the practice or capped the interest rates.

For information on other types of predatory lending, check out our article on bad credit auto refinancing.