First of all, let us understand how these companies work. The customer gains a loan by securing it on their purchased car. There are no credit checks to go through, which is attractive to those who may have bad debt, so that is a bonus. But before you decide to go for such a loan, you must know and understand what you are getting into.
The loan has to be paid back within a full 30 day period. If not, then the Interest rates that these companies give, can be anything up to and over triple figures – 250% in most cases and higher. So, if you are late in paying back your loan with these lenders. then be prepared to pay back the loan at triple the APR. Obviously this can lead to your car being taken for good, and also lead to dire financial trouble for yourself if you are late in repaying back the loan you took out.
These types of lenders, although they are not breaking the law, are classed as ‘predetary lenders’. This classification is given to them by organizations such as the Consumer Federation of America, and the Center for Responsible Lending. Both these non-profit organizations have focused on the issues that customers face when dealing with such companies – in reference to car title loan companies.
In deciding to go for a car title loan, one must be absolutely clear on the interest rates that such loans offer. One must also be clear that the loan, as stated above, is paid within 30 days. This is because once you are late paying, then that is when the APR kicks in. And once that happens, it can leave you in dire financial trouble.
In fact car title loans – other than declaring yourself bankrupt – is one of the very last courses of action that one will take when desperate for money to consolidate other bills. So you really have to think very carefully indeed before you decide to apply for such a loan. Remember, your car is kept as security – and is kept for good – if the loan is not paid back within the 30 day period.
There are many people who do not like the APR placed on credit cards, and quite rightly baulk at such rates. But compare those rates to the APR placed on car credit loans, they then become very small in comparison to what you ‘could’ be paying back, if you applied for such a loan
Companies who deal in ‘car credit’ are in a completely different category to those of banks and credit card companies. They are able to charge you, the customer, triple digit interest rates because they are able to work around usury laws. When one looks at this more closely, there are only a few States in America that have passed very strict laws – in reference to such companies – setting unreasonable and triple-charge APR interest rates.