An Overview of

Car Title Loans

in the US

A title loan –

also known as an

auto title loan,

car title loan, or

pink slip loan –

is a type of

secured loan that

allows people to

borrow money in exchange for their

vehicle title. Banks and lending

companies take the title as collateral

and let the borrower keep the vehicle.

Many people see this as an ideal

solution for emergency expenses, as

they can apply with a bad credit and

even a prior bankruptcy.

How Car Title Loans Work

Lenders will hand over a specific

amount of money, which shouldn’t be

30% to 50% higher than the actual

value of the vehicle. The borrower

should repay in full before the deadline

(30 days), including the monthly fee in

one lump sum payment. If the

borrower cannot repay on time, they

can either pay an additional fee to

rollover the

loan or let

the lender

seize the

vehicle, sell

it, and keep

the profit.

How to Compute for a Car Title

Loan

Banks and lending

companies usually

charge a monthly

fee, which is about

25% of the

borrowed money.

For instance, if borrowers received an

amount of $1,000 for the vehicle, they

need to pay an additional $250 per

month to clear the debt.

These additional fees are among the

factors why borrowers keep rolling over

their loan. According to the Center for

Responsible Lending, about 19% of

borrowers in Oregon renewed their car

title loan six times before paying it off

completely. Many Americans share the

same story, saying it took them a longer

time to recover and pay their debt.

How Not to Fall in the Loan Cycle

Trap

Banks and lending companies have a

set of qualifications for the application

for a car title loan. This is to make sure

that borrowers have the ability to repay

the money they owe. These

qualifications only serve as a basis,

though. It should also be the

responsibility of borrowers to know if

they can repay on

time.

Car title loans are

beneficial for those

who need extra

funds. A loan may

have additional

fees, but if people are aware of their

future expenses, they won’t have a

problem repaying their debt.

Sources:

http://www.consumer.gov/article

s/1013-car-title-loans

http://www.responsiblelending.or

g/other-consumer-loans/car-title-

loans/research-analysis/CRL-Car-

Title-Report-FINAL.pdf

http://www.utahmoneycenter.co

m/title-loans/car-and-truck-loans/