Signs of a Predatory Car Title Loan

If you're strapped for cash, you may be tempted to respond to lenders who market "car title lending"-- loans that require you to risk losing your car. Before you or your family sign away your transportation, check out these four signs of a predatory car title loan. You'll see why most car title loans are just a financial wreck waiting to happen.

SIGN 1

HIGH INTEREST RATES

Though car title lenders often express the cost of their short-term loans through fees, a typical car title loan may have a high annual interest rate of 300% or more.

SIGN 2

QUICK DUE DATE

Most car title loans are due within a month. Such quick due date will make it harder for you to pay off the loan on time, leading you to a cycle of repeated loans that leaves you worse off.

SIGN 3

VEHICLE AT RISK

Title lenders secure their loans by holding onto the title of your vehicle. If you cannot pay off the loan when itʼs due, the lender may take your car away.

SIGN 4

CYCLE OF DEBT

Itʼs not unusual for this short-term loan to end up as a cycle of long-term, high-cost debt. In Missouri, for example, the state auditor found that car title lenders make 3.5 times more renewal loans than new loans each month.