Auto title loans are short term loans that allow you to pledge title to an asset in exchange for cash. The most common auto title loan is a car title loan. Before you use a auto title loan, make sure you know the pitfalls.
Basics of Auto Title Loans
To get a auto title loan, you go to the lender with something of value - often your vehicle. The lender decides how much cash to give you, and you promise to hand over the vehicle (or other collateral) if you don’t repay as agreed.
For more specifics, see How Car Title Loans Work
Auto Title Loan Amounts
In general, auto title loans are small loans. They’re a good deal for the lender, since they have a good chance of getting all their money back by selling the asset you pledge. This means that auto title loans are often not as advantageous for borrowers. You put a lot at risk for a small loan.
Auto Title Loan Problems
The main problem with auto title loans is that you can lose the asset you pledge as collateral, and you don’t get much in return. Yes, you get a little bit of money from auto title loans, but the risks are high.
For example, you might pledge your car for a auto title loan. What happens if you can’t pay as agreed? You’ll lose your car, and you may lose your ability to get to work and earn income (or get to job interviews and get back on your feet).
In addition, auto title loans are generally expensive. Before you use a auto title loan, explore all of the alternatives:
The Lowdown on Auto Title Loans
These loans should be a last resort. You may find that a auto title loan will get you out of a short term pinch, but you should try to avoid them.
Varieties of Auto Title Loans
Auto title loans go by a variety of names: