How To Avoid Car Title Loans
Like payday loans, car title loans are small-dollar, short-term loans that carry triple-digit interest rates designed to drive borrowers deeper into debt and ultimately take away their only means to get to and from work.
While some states have passed laws that limit the damage these loans can have on hard-working families, for the most part, car title loans remain a bad deal for all borrowers. Until a a reasonable APR cap is implemented on these high-cost loans, the best thing a consumer can do is to avoid them completely.
Before even considering a car title loan, follow these simple tips:
1. Pay attention to the APR. Car title loan rates can range from 84% to as much as 300% and more. Don't be fooled by the "small and easy" initial fee, more often than not, borrowers end up taking loan after loan in an endless cycle of debt.
2. Shop Around. Because car title loans are heavily advertised as quick and easy ways to meet a financial emergency, you may be inclined to step into their trap, but before you do that, go to your nearest bank or credit union to check out any alternatives they may have, or avoid a loan altogether by asking your friends and family for help.
3. Keep a savings account for a rainy day. It's possible. Keeping a few extra dollars in a saving account can help you avoid being caught by car title lenders.
3. Stay clear from of all predatory loans. Payday loans, refund anticipation loans, and overdraft loans are not better options, so stay clear from all those false choices as well.
4. Avoid forced arbitration clauses. If the unthinkable happens and you must take out a car title loan, be sure to avoid any forced arbitration clauses so you may take any disputes to court.
5. Ask Congress to enact a 36% APR cap. You can help others avoid these dangers of these loans by contacting your representatives and asking them to enact a reasonable rate cap on these loans. A rate cap is the only real solution proven to protect against the unreasonable high-cost of these loans
