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Car title loans are short term loans against your automobile. When you get a car title loan, you pledge your auto as collateral in order to get cash.

As lending standards have tightened, some people are finding it harder and harder to borrow money. They may have to look towards car title loans because these loans give the lender more protection. They'll lend you a little bit of money (much less than your vehicle is worth), and they have the right to take your vehicle and sell it if you don't repay on time.

While they may be appropriate in some circumstances, car title loans are expensive and risky. One of the major problems is that you may lose your car - and therefore your ability to get to work and earn income.

Before you use a car title loan, do your homework and understand how they work.

Further reading:

May 13, 2009 at 12:53 pm
(1) Fred says:

Thanks Justin on your post about title loans. I work for a title loan company and for the longest time the industry has had a hard time getting some respect. Then I went to my bank the other day and they are offering a version of a pay day loan at what amounts to 120% interest! This is a BANK.

I think that as more and more banks struggle they are now looking at ways to make income and this is now one more way.. but at an interest rate which is HIGHER than most car title loans. Our interest rate is 7.5% monthly on loans above 5K and 8% below that while the banks is 10% monthly. Love to see a post from you on this new banking product.

People do lose their cars sometimes if they don’t pay on the note but trust me, working an a person inside the industry, we hate to do it. The costs of getting the car and the plummeting values of used cars at auctions puts the title loan lender usually at a loss. We do whatever we can to help the person who is struggling to pay the loan back because it just makes good financial sense.

Thanks for the post and your thoughts.

June 19, 2009 at 7:37 pm
(2) Josh says:

Justin, Thanks for the article on car title loans. Title loans are for people who need money fast. It is a short term solution to a financial struggle. The companies who give out these loans are more than willing to explain the entire process to the borrower and are helpful throughout the duration of the loan. As far as the riskiness, there is risk in every financial situation. Also, in today’s economy, interest rates are lowering, therefore, title loans are becoming less expensive.

October 22, 2009 at 5:07 pm
(3) Marlene says:

Hi there,

Thank you for you article on car title loans. car title loans is the solution for poeple with not such great credit to get a fast and easy loans.
I work at a car title company that gives loans to poeple from all talks of life for the interest rate of 4.7% monthly. Yeah! believe it or not. A great rate. At this point many poeple throughout the world came to the concusion that going through the bank is absolutley not an option . Most of the time they do not accept it or if they do they let you wait a few months until they finaly approve you and need to know exactly why you are using it. A car title loan is a simple solution for quich and easy cash, with a great interest rate, and our company does not even charge for admin fee. The clients do keep there car. It is only taken away if they really default in payment.

Furthermore the staff is just great, not at all as the cold professional style of a bank. One of our clients commented that it’s great to work with real poeple not like poeple who make feel that they’re superior and your lowly because your in need of a loan.

Any how you can defintley try a car title loan. It will not hurt.

October 23, 2009 at 11:34 pm
(4) Preston says:

I live in Texas and took out a car title loan last month. The biggest financial mistake I have ever made! The loan was provided through a Credit Service Organization which charged a $1200 fee to originate the loan for $4000.00. I didn,t pay the loan off in 30 days and so they charged me another $1200 fee.I will either lose my truck or have to File Chapter 13 to hopefully escape the fees and interest associated with this loan. If you live in Texas, DO NOT TAKE OUT ANY KIND OF SUCH LOAN!!!

August 29, 2011 at 7:47 pm
(5) Jimbo says:

Obviously,posts number 1,2,&3 above from”Fred”, “Josh”& “Marlene are just commercials shilling for the payday/car title loan sharks. “Fred” claims ‘the banks’ charge 10 % A MONTH on short term loans !!!! Think about that for a minute!Even the legal thievery of some bank organization are not gonna charge you over 140% a year interest.As for the car title loans,you’re probably better off going to the local mafia loan shark in your neighborhood.The ‘vig’ will be less & if you get behind on your payments he’ll just break your kneecaps but at least you’ll still have your car!

September 26, 2011 at 11:25 pm
(6) Comedian says:

Jimbo said :

“Obviously,posts number 1,2,&3 above from”Fred”, “Josh”& “Marlene are just commercials shilling for the payday/car title loan sharks. “Fred” claims ‘the banks’ charge 10 % A MONTH on short term loans !!!! Think about that for a minute!Even the legal thievery of some bank organization are not gonna charge you over 140% a year interest.”

I agree with Jimbo that the first 3 were just commercials for the title loan people and Jimbo really must know since he seems to be the perfect client for these sharks. They prey on short brained people and you just heard Jimbo who thinks a year is 14 months long (140% divided by 10% = 14 months).

January 28, 2012 at 6:43 pm
(7) P.T says:

Most of the people look at the pay day lone or title loan from the outside of the box. Yes, I do agree that it does sound very, very, very bad, it seem like these agency are taken advantage of poor people. That thought was right!!

But, that because you never have people that in need of money but poor credit (bank won’t want to take to them and not being able to borrow from relative because they don’t pay) come to you and kneed-down begging to borrow money. If anyone think payday loan and title loan are bad, why don’t you try to let those people (you don’t know, very bad credit) borrow like 500 dollars? 99.5 percent of the time, they will run off with your money and will never pay you back a penny. These companies take 99.5 percent risk so in my opinion they have the right to charge an appropriated amount for the risk they taken.

The payday loan and title loan people never put a gun to the borrower head and tell them that they need to borrow or ELES. Those people bring themselves to borrow money, because they have no other way to get the money they needed. Payday loan and title lone people explain all consequences and policies, and the borrower sign that mean they agree to the requirement. They can’t just borrow and said they can’t pay because of B.S reason; they should think of the consequences before they borrow. There is nothing free in America, those people should know.

If anyone think they know the thought of the borrower please reply to this message, I would like to know how people think and react to this because I was thinking about joining the franchise.

August 31, 2012 at 3:26 pm
(8) Charlie says:

If you need money and have a clear title a credit union can be a good place. I am not desperate, but wanted to buy a new toy and didn’t want to put it on my credit card (and I will certainly have the money in 3 months).

My local credit union gave me a really large loan at 2.3% APR interest, no closing costs, 30 months.

Honestly thinking I might take the full 30 months to pay it back anyways. 2.3% APR!!!

December 6, 2012 at 6:15 pm
(9) John Moore says:

You just have to do your research and “shop” around for the best deal. Not all title loan companies are alike. I negotiated my deals and had a pleasant experience. I have terrible credit.

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