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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 your vehicle.
 

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

 

 

 

 

 

 

 

 

 

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