Many Americans who need fast cash for a financial emergency turn to car title loans. However, The Federal Trade Commission warns consumers to be wary of car title loans and their repercussions.
Car Title Loans: What You Should Know
A car title loan is a way to get quick cash by offering up your car title as collateral. Car title loans typically range between $1,000 and $10,000, but car title loan providers will typically only offer a loan at 40% or less of what your car is worth. When you apply for a car title loan, you usually don’t have to go through a credit check or provide proof of income, because the lender feels secure in the fact that they can take your car if you don’t pay.
Most of the time, a borrower seeks a car title loan when they have a financial emergency and don’t feel they have another choice. The borrower approaches the title loan lender, who takes some time to assess the value of the car. The title loan lender then offers a loan based on a percentage of the car’s appraised worth. When the borrower accepts the terms of the title loan (usually less than one hour later), they hand over their car title until the loan is paid back in full.