Consumer Car Buying Advice Blog

Unlike financing a bad credit car, auto title loans can end up costing you more than just a high interest rate

Why we know

If you need cash quickly you could be looking at a car title loan and wondering if that might be way to go.

We’re familiar with these issues because we’ve been in bad credit auto sales for nineteen-plus years and have personally helped hundreds of bad credit buyers get a poor credit car loan here at Auto Credit Express.

We also help them avoid a tote the note dealer and walk them through the horrible credit auto loans process to, among other things, reduce their chances of repossession (buyers can also fill out our online auto loans application).

But if you need cash fast, does a bad credit car title loan make sense?

Title loans

Car title loans are loans in which a paid-off vehicle is the collateral. Title loans typically range from $175 to $2,500 with a term of 30 days and their maximum interest rates are not as strictly regulated as car loans. In many states, interest rates can average 30% per month – an annual percentage rate of 360%.

Lenders also typically charge an origination fee and, in many cases, operate out of storefront locations that also offer check cashing services and pawn loans.

How car title loans work

For example, if you take out a title loan in the amount of $500, you’ll give the loan company your free and clear car title as collateral and an extra set of keys (if you don’t pay it back, the car belongs to the lender). After paying a $15 origination fee, you’ll sign loan papers that state you’ll pay them the interest plus principle in 30 days. If the interest rate is 30%, that’s $150 plus the $500 in principle.

If you can’t come up with the entire amount (partial payments are usually not accepted), the lender will allow you to roll it over for an additional 30 days, provided you pay them the $150 in interest charges. Most states will allow four rollovers per loan.

The total loan cost

If you roll over the loan twice, for a total of 3 months, your actual costs for a $500 title loan would typically look like this:

1.    $15.00 origination fee, plus
2.    $450.00 in interest ($150 times 3 months)

In this example, it means it has cost $465.00 in interest and fees to borrow $500.00 – and an annual percentage rate (APR) of 91% – three to five times higher than bad credit auto loans.

As we see it

Think very carefully before you taking out a car title loan. In addition to the fees and high interest rates, you’ll also be putting your car at risk. If you default on the loan, you’ll have to surrender a car that is probably worth many times the amount of the loan and possibly the only way to get to and from your job.

Auto Credit Express has helped thousands of people in bad credit situations buy a car and establish their auto credit through a network of affiliate dealers that specialize in terrible credit auto loans.

So if you are serious about getting your car credit back on track, you can begin by filling out our online auto loans application now.

Tags: Bad Credit, bad credit car, car title loans

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