Auto Title Loans Carry High Interest

NJ.com
July 20, 2009
Danikas, Alky

Car-title loans are relatively common in the southern United States, but their reach is spreading across the rest of the nation. Many of the loans -- which require customers to pledge a personal vehicle as collateral against a loan for up to half of the car or truck's wholesale book value -- are being farmed out on the Web by out-of-state businesses, especially those based in California. In New Jersey, auto-title loans are lawful even though payday loans are technically illegal. Yet both charge exorbitant rates; and both payday shops and car-title lenders are patronized primarily by consumers who have poor credit or do not have access to traditional funding sources, such as credit cards or cash advances. Moreover, title-loan customers who fail to repay the debt may lose ownership of their vehicles. While consumers looking for alternative sources of cash may find one in car-title lenders, it is a very costly one -- especially since the 30-day repayment plan and ability to "roll over" loans for an additional month often ensnare the borrower in a cycle of debt.