“Do you need cash now? Then look no further than your driveway and turn your car into cash,” as the ads normally go. Desperate for cash and with lenders selling these loans like “crack dealers to drug addicts,” it’s no wonder why many are stuck in a vicious cycle of debt. The LA Times (@LaTimes) recent article on the auto title loan industry in California warns consumers to be wary of these loans that force consumers to borrow more than they need at more than 100% interest rates! Read the LA Times article, here.
California law currently puts no limit on the interest rates for loans greater than $2,500.00, which is why auto title lenders will push unwary borrowers into taking more money against their cars than they really need. I can only assume that you would feel “special” or “happy” to hear that you’re approved for more than you originally requested, but BEWARE that the hand that is about to give you cash has a BITE. The sting comes in the form of high interest rates that can be anywhere from more than 100% more than 400% interest! Also, if you don’t repay these loans, they’ll take your car!
Auto title loans are riskier than payday loans because your car can be repossessed if you don’t repay the loan. However, there are better solutions that include considering filing for bankruptcy, if the reason for the loans is to repay other debts, or if you’re stuck in a cycle of debt where you continue to take more loans to repay other loans. Last week I discussed several options for dealing with your car in bankruptcy and redemption loans could very well help you keep your car and lose that debt.