What are the pros and cons of auto title loans?


Quick Answer

The pros of taking out a car title loan include the easy application process, which usually requires no credit check, and same-day or overnight access to funds, while the cons are extremely high interest rates and the chance of losing the car used as collateral, according to Working Home Guide. Car title loans usually have interest rates from 25 percent to more than 200 percent and entitle the lender to repossess the borrower's car if he cannot repay the loan.

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What are the pros and cons of auto title loans?
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Full Answer

Car title loans usually do not have a limit, making it possible to borrow what is needed and to avoid personal loan limits often set by banks, notes Mortgage Calculator. Car title loans, however, tend to be short-term loans, which, when coupled with the high interest rates, are frequently hard to repay on time. The borrower has use of his car during the period of the loan, which is usually 90 days. If the borrower loses his car because he can't repay the loan, the loan balance is reduced by the amount the lender gets when selling the car. If this amount is less than the loan balance, the borrower is still liable for the difference, explains


Some lenders agree to extend the repayment period, but this usually involves additional service fees and accrued interest. While some states have restricted the allowable interest rates on car title loans, Mortgage Calculator reports that some lenders, in order to avoid these restrictions, offer zero-percent interest loans and then move the loan to a lender with extremely high rates at the time of renewal.

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