| Payday loans have received a lot of negative press | | | | of the proceeds from the sale, even if they exceed |
| lately as states and municipalities try to regulate an | | | | the value of the loan.With collateral, one would think |
| industry that legally lends small amounts of money at | | | | that the interest rates for such loans would be far less |
| interest rates that can reach a breathtaking 1000% per | | | | than for payday loans, but that is not the case. |
| year. A less well-publicized variation on the payday | | | | Nationally, interest rates for auto title loans average |
| loan is the car title loan, which requires the borrower to | | | | about 300% per year, which hardly makes the loans a |
| provide his or her automobile as collateral for the loan | | | | bargain. In addition, the loan amounts rarely represent |
| amount. While this type of loan is not as widely | | | | more than a fraction of the value of the vehicle. A loan |
| publicized as the payday loan, the car title loan is even | | | | of even half the vehicle's value would be regarded in |
| more dangerous, as it could cost the borrower their | | | | the industry as quite generous.The same sorts of |
| car!Payday loans, also known as cash advance loans, | | | | problems that occur with payday loans also happen |
| are unsecured loans. The lender trusts the borrower to | | | | with title loans. The borrower is often unable to repay |
| pay back the money within two weeks. This type of | | | | on time and must extend the loan by paying an |
| loan is risky for the lender, but that risk is more than | | | | additional fee. Under some circumstances, it is possible |
| offset by the high interest rates charged for the loans, | | | | for the fees to eventually exceed the value of the |
| which can easily top 400% on an annualized basis.A | | | | loan itself. And unlike other loans, the borrower is under |
| car title loan works differently, however. With this type | | | | pressure to avoid losing their car.This type of loan is |
| of loan, the borrower offers his or her car as collateral | | | | overwhelmingly weighted in favor of the lender, who |
| and is often asked to provide a spare set of keys | | | | will end up with something of far greater value than |
| when the loan is granted. Should he or she default on | | | | the loan should the borrower forfeit. Those who have |
| the loan, the car will be forfeited and sold to repay it. In | | | | short-term cashflow needs would be well advised to |
| some states, the lender may sell the car and keep all | | | | borrow from friends, relatives or a credit card instead. |