Car title loans have a bad reputation, but they can be useful if used responsibility. These loans are made to people who are willing to put up the title to their car for collateral. While they usually have high fees and interest rates associated with them, they can be a good idea in some situations.
People who turn to title loans are usually in a position where they need cash for an emergency expense. In general, these loans are made to people who do not have another source of credit to turn to. Although the title loan company will take the car title as collateral, meaning that the title loan company will own the borrower’s car if the loan is not repaid, the fact that the borrower cannot obtain credit from any other source makes the borrower a high credit risk.
Because of this, auto title loans are usually made at a much higher interest rate than other types of loans. To an outside observer, this can seem as if these loans are scams, but in fact the high interest rate is a way for the loan company to compensate for the high risk they take on when making these loans. Nonetheless, it is generally recommended that consumers only use these loans as a last resort.
Taking on a title loan can be a good idea if you know you will be able to pay it off quickly. To do this, start by making a budget and figuring in the loan payments into the bills that have to be paid every month. Many people choose to pay off the loans quicker by picking up extra hours or a second job. Other people are able to make their payments by cutting back on expenses.
Car title loans work out well for people who have a plan for how to pay them off. In fact, most people only get in trouble with these loans when they are unable to make their payments and end up in a cycle where they must continue to renew the loan (and pay more fees) while they figure out how to get the loan paid off.