Essentially, what you are doing when you secure a title loan is borrowing money against your property. Because of this, you will likely have to pay very high interest rates - in some cases, double or triple the average interest rate. Moreover, borrowers often have to surrender their cars or homes in order to obtain the needed funds. Although these fees may seem steep, title loans may be an appropriate way for certain borrowers to obtain quick cash.
In addition to high interest rates, some credit card companies offer attractive "low risk" credit cards that come without annual fees, long-term payments, and negative credit history penalties. Unfortunately, these cards come with exorbitant fees, as well, such as finance charges, application fees, and monthly and quarterly fees. On top of these fees, many credit card companies also charge a "transaction fee" fees that are designed to add tens of thousands of dollars to the cost of monthly debt repayments. Instead of using their cards to pay off their debts, many people instead use these "revolving debt" credits to finance big-ticket items, like vacations, new automobiles, or large entertainment purchases. When these consumers can no longer pay for their vacations or automobiles, they usually must get back behind the eight ball and start filing for bankruptcy. This only further exacerbates the high interest rates and fees.
Because bankruptcy may not be right for some consumers, some lenders try to provide debt relief by offering title loans. These "short-term" loans, typically between three and ten days in length, are offered to consumers with falling credit scores. Although there is typically a relatively short waiting period before one is able to receive approval for one of these types of title loans, the fees associated with them make them unsuitable for many borrowers. Title loans often come with finance charges of up to twenty-five percent. The finance charges are designed to make the loan's "interest rate" higher than the combined rates on one's credit cards and other lines of credit. Although some title companies do charge reasonable interest rates, these rates still can be much higher than what a person would pay if he or she were able to obtain a traditional auto loan or an unsecured credit card. Find top auto title loans providers at https://georgiatitleloans.com or click for more deals.
Because title loans may seem like a short-term loan, interest rates can increase rapidly once the approval is denied. A short-term loan only has a limited amount of time for its term. Once it is completed, the borrower must move on. Although interest rates on short-term loans are typically higher than long-term ones, they are still nowhere near the rates that are charged by credit card companies. In fact, the APR on a short-term auto loan may be significantly less than the highest APR car loan rate! In short, it is not exactly a wise financial move to take out a title loan simply because the interest rate is much lower than the going rate on a credit card or other line of credit.
Title loans do not alleviate the burden of high monthly car payments but do not solve the real problem: high monthly debt. In the meantime, the consumer is left carrying the entire burden of these bills until the full loan payment at the end of the short-term loans is paid off. The end result is usually a situation where the consumer is so far in debt that bankruptcy is considered. In this case, the consumer is actually worse off than before because bankruptcy is often a very lengthy and expensive process. The better choice is to keep the car, pay the short-term loans and make only the minimal monthly payments to eliminate the debt. You can read more on this here: https://www.huffpost.com/entry/situations-when-opting-ca_b_9759098.
