Car Title Loans Offer Risky Cash

Payday loans have received a lot of negative pressof the proceeds from the sale, even if they exceed
lately as states and municipalities try to regulate anthe value of the loan.With collateral, one would think
industry that legally lends small amounts of money atthat the interest rates for such loans would be far less
interest rates that can reach a breathtaking 1000% perthan for payday loans, but that is not the case.
year. A less well-publicized variation on the paydayNationally, interest rates for auto title loans average
loan is the car title loan, which requires the borrower toabout 300% per year, which hardly makes the loans a
provide his or her automobile as collateral for the loanbargain. In addition, the loan amounts rarely represent
amount. While this type of loan is not as widelymore than a fraction of the value of the vehicle. A loan
publicized as the payday loan, the car title loan is evenof even half the vehicle's value would be regarded in
more dangerous, as it could cost the borrower theirthe 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 towith title loans. The borrower is often unable to repay
pay back the money within two weeks. This type ofon time and must extend the loan by paying an
loan is risky for the lender, but that risk is more thanadditional 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.Aloan itself. And unlike other loans, the borrower is under
car title loan works differently, however. With this typepressure to avoid losing their car.This type of loan is
of loan, the borrower offers his or her car as collateraloverwhelmingly weighted in favor of the lender, who
and is often asked to provide a spare set of keyswill end up with something of far greater value than
when the loan is granted. Should he or she default onthe loan should the borrower forfeit. Those who have
the loan, the car will be forfeited and sold to repay it. Inshort-term cashflow needs would be well advised to
some states, the lender may sell the car and keep allborrow from friends, relatives or a credit card instead.