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Don't Rush into a Car Title Personal Loan

[Feb 3, 2009.]

 

Car title loans promise fast cash for people with bad credit who've been locked out obtaining personal loans through banks. Generally, no credit check is required, which may make car title loans seem like a great deal to people looking for any way to raise money to pay their bills.


But car title loans aren't the best way to raise cash. The lender takes possession of the title to a borrower's car, so if the money isn't paid back, the borrower must give the car to the lender. In too many cases, people who pawn their car for fast cash end up losing the vehicle they need to get to their job.


So how do lenders decide how much a car title personal loan will be? Basically they look at the amount of equity the borrower has in their car. In most cases, lenders will not extend car title loans if the vehicle's owner is still paying on a car note because they won't have access to the title.


People with bad credit who see no other option to raise cash than a car title personal loan must read the contract carefully before signing. The contract should spell out the interest rate, which is likely going to be painfully high. An Atlanta Journal-Constitution article featured a man who agreed to pay 25% a month, or 300% annually, on a $2,000 car title loan. His car was later repossessed.


The contract also should explain how interest rates will increase over time. Other information that should be in the contract includes the amount of penalties and fees for missing and late payments.


Car title loans aren't legal in most states, so be skeptical of ads offering them and check with the attorney general in your state before signing up. Make every effort to raise cash some other way to avoid going with a car title personal loan.  


 

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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