An Auto Title Loan is a loan taken on short term, generally not more than 30 days. The loan is secured by using the title of your car. This basically implies that in the event of you not repaying the loan, the lender has the right to take your vehicle and sell it in order to recover the loan money. Auto Title Loan lenders will usually provide the loan only if there is nothing else owed by you on the car.
Here are some Auto Title Loan tips:
How do lenders function? - Auto loan lenders usually focus their attention on elderly people, military personnel, individuals with low-income, and people who have bad credit. Their main method of making money is by charging high rates of interest and of course by repossessing the consumers' cars when they are unable to pay the loans off.
Why do you need to beware of an Auto Loan? - When an individual is undergoing monetary problems, a short-term loan like an Auto Title Loan may seem to be an attractive option, particularly for people who have credit problems. But, an auto loan is a short term solution and it has the potential of having devastating effects. It can mean you having to pay excessively high rates of interest and enormous amounts of money or end up losing your car.
What is the maximum amount of money that a lender can loan you? - Auto Title Loan lenders can make loans only according to a fair assessment of the market value of your car, which common industry guide appraisals determine. Usually loans may range from $601 to $2,500.
So, exactly how high are the interest rates? - The loan is made out showing the interest rates that apply for a short period of time. For instance, a 25 percent interest rate will be shown by the loan for a single month. However, if this rate is calculated over a year, it actually comes to 300 percent. Auto Title Loan lenders generally give a loan for a period of 30 days or less. Hence, at the month's end, the lender will agree to take the interest payment and let the debt roll over to the next month. Therefore, if you take a loan of $600, the interest would amount to about $150, which means you owe a total of $750. So, if you pay only $150 at the end of the month, it will mean that the amount you owe the next month comes to $750.
What if you are unable to pay off the loan in the stipulated time? - If you are unable to pay the loan off, it will just be rolled over to the next month. Often, the borrower cannot pay off the full amount of the loan, so the interest begins building up once again at the high rate. This is known as 'flipping' or 'rolling over' the loan.
Why are Auto Title Loan lenders called 601 lenders? - The high rates of interest that these lenders charge can only be done on loans the amount to more than $600. Loans that are taken lower than this amount have interest rates that are limited, which means that the lenders would not be able to make as much money. This is the reason they are often called 601 lenders.
Is there any limit to the number of times an auto loan can be 'rolled over'? - According to the law, the loan can't be rolled over more than six times. In case it is rolled over as many times as that, it will mean that the amount of interest to be paid will be very high.
What happens when the loan is not paid off? - Except in the case of a fraud, all the Auto Title Loan lender can do take your car away from you and sell it. In other words he/she cannot sue you to make you repay the loan, but have the right to repossess your car. If this is about to happen the best course of action would be to call a lawyer.
Can a lender give an initial low interest rate, and then increase it in later renewals? - According to the law, the Auto Title Loan lender cannot offer or advertise a lower rate of interest for the initial period if in the later renewals the rate of interest increases.
Can you get out of the deal after signing the papers? - You certainly have the right to rescind or cancel or the deal, as long as you do it within a single business day. You have to give back the borrowed amount, without interest, before the next business day closes after taking the loan. For instance, you take an auto loan on Monday, if you decide to cancel, you have to return all the money, without interest, by the end of Tuesday.
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