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Could Car Title Loans Ruin Your Finances?


One in five people aged 45 to 64 with an income of less than $ 50,000 used a vehicle for a short-term loan. And about a third of people aged 65 and over have received auto title loans.

“The reason almost everyone gets these loans is normally to pay for an immediate expense,” such as a gas or electricity bill or an owed credit card bill, explains Speer.

But the average person who borrows $ 1,000 from a securities lender usually ends up paying back around $ 3,000 to $ 4,000, he says.

So while the car title loan can help pay the initial bill, “now you’re in a lot worse shape,” says Speer. “All in all, it’s going to end up being an even bigger crisis and your situation is going to be a lot worse.”

Repeated messages left with the American Association of Responsible Auto Lenders, an industry trade group, were not returned. However, Pat Crowley, spokesperson for the Ohio Consumer Lenders Association, which represents securities lenders in that state, says the loans are “very cheap” compared to alternatives. “We’re fully regulated. We’re very transparent about the fees we charge and our pricing structure is very clear,” Crowley said.

“We think auto title loans are actually cheaper than other types of unsecured loans,” he says.

Here’s how car title loans work

When you get a title loan, it is a short-term loan – usually for just one month – that you secure with the title of your vehicle. While the majority of title lenders require you to own your car, some do not. Either way, the lender is putting a lien on your car. When you pay off the loan, the lien is removed and you get your title back. Sounds easy enough, right? Generally speaking, that is. Even retirees can get car title loans, as long as they have a valid photo ID and proof that they own the vehicle. In many states, there isn’t even a credit check.

The loan amount is based on the appraised value of the vehicle, and it is common for consumers to borrow between 30% and 50% of the value of their car.