How To Avoid Car Title Loans
Cash for Clunkers?
Most title loans have interest
rates as high as 300%.
Car title loans are small-dollar, short-term loans that carry triple-digit interest rates designed to drive you deeper into debt and ultimately take away your vehicle.
While some states have passed laws that limit the damage these loans can have on you and your family, for the most part, car title loans remain a bad deal for everyone. Until a a reasonable interest rate is implemented on these high-cost loans, the best thing you can do is to avoid all title loans.
If you still need to consider a car title loan, keep in mind the following tips before you give away your vehicle:
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, people 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 give you instant cash, you may fall easily into their trap, but before you sign your car away, go to your nearest bank or credit union to see what other options they may have; or if you can help it, 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 title lenders next time you are in a bind.
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 you must take out a car title loan, be sure to avoid any forced arbitration clauses in your contract so you may take any disputes or complaints directly to a judge.
5. Help enact a fair 36% interest rate. You can help others avoid dangerous interest rates by contacting your representatives and asking them to enact a fair rate on these loans. A reasonable 36% interest rate is the only way we can ensure that consumers like you receive a fair rate in their title loans.