Finance Quick Answers
Is a title loan a good idea?
A title loan is a way to borrow money against the value of any vehicle with a title. You can only get a title loan if you own your vehicle free and clear. What the lender will loan to you is based on the value of your vehicle. The rate of interest on these loans ranges from about 22% to 25% per month. On a loan of $1000, that could be as much as $250.
A contract will spell out the monthly fee you are
being charged, the due dates, amounts and number of
payments you must make, and the total amount of money
you must pay to get your title back. You can keep your
vehicle while the lender keeps the title as security for
repayment of the loan, however, if you cannot make the
payments, the lender will repossess your vehicle, sell
it and pocket whatever money he gets. If you are even
one day late, the lender can repossess your vehicle. You
will then have 20 days to pay off the loan and any fees
for repossession, storage, etc., in order to get back
A title loan may seem like a good way to get quick
cash. The fees, however, are very large and you run the
risk of losing your vehicle, which may be your only
source of transportation. What seems like a short-term
solution can become a long-term problem.
Brenda Bell, Human Environmental Sciences Specialist, South Central Region, University of Missouri Extension
Last update: Sunday, July 20, 2008