Car title loans are usually for 30 days. The title to the borrower’s car is the security for the loan. If the loan is not paid back in 30 days, the borrower risks losing the vehicle. The loan usually is extended. Then the borrower faces the kind of fees and interest hikes that payday loan borrowers face.
The extensions are secured by the borrower’s next paycheck.
A new report says borrowers usually renew their loans many times. The average car title borrower renews the loan eight times, paying $2,142 in interest and fees for borrowing $951. The report looked at “TitleMax,” a large chain of car title lenders, as well as others.
Car title loans are made on the value of the car, not the ability of the borrower to repay the loan. These short-term loans can turn into long term, high-cost debt.
When borrowers fail to make payments, the car is seized. Borrowers then have to pay repossession fees and may lose the car.
This is not a loan you want to take out.