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