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Car Title Loans Offer Risky Cash

Payday loans have received a lot of negativefrom the sale, even if they exceed the value
press lately as states and municipalities tryof the loan.With collateral, one would think
to regulate an industry that legally lendsthat the interest rates for such loans would
small amounts of money at interest rates thatbe far less than for payday loans, but that
can reach a breathtaking 1000% per year. Ais not the case. Nationally, interest rates
less well-publicized variation on the paydayfor auto title loans average about 300% per
loan is the car title loan, which requiresyear, which hardly makes the loans a bargain.
the borrower to provide his or her automobileIn addition, the loan amounts rarely
as collateral for the loan amount. Whilerepresent more than a fraction of the value
this type of loan is not as widely publicizedof the vehicle. A loan of even half the
as the payday loan, the car title loan isvehicle's value would be regarded in the
even more dangerous, as it could cost theindustry as quite generous.The same sorts of
borrower their car!Payday loans, also knownproblems 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 backoften unable to repay on time and must extend
the money within two weeks. This type ofthe loan by paying an additional fee. Under
loan is risky for the lender, but that risksome circumstances, it is possible for the
is more than offset by the high interestfees to eventually exceed the value of the
rates charged for the loans, which can easilyloan itself. And unlike other loans, the
top 400% on an annualized basis.A car titleborrower is under pressure to avoid losing
loan works differently, however. With thistheir car.This type of loan is overwhelmingly
type of loan, the borrower offers his or herweighted in favor of the lender, who will end
car as collateral and is often asked toup with something of far greater value than
provide a spare set of keys when the loan isthe loan should the borrower forfeit. Those
granted. Should he or she default on thewho have short-term cashflow needs would be
loan, the car will be forfeited and sold towell advised to borrow from friends,
repay it. In some states, the lender mayrelatives or a credit card instead.
sell the car and keep all of the proceeds



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