Over the years we have purchased a good number of cars because of tile loans. The customer needs extra cash and gets the title loan. He can then afford the interest payments on the loan, but when the principal comes due, he isn’t able to afford it. He then renews the loan again. It becomes a vicious cycle. He gets to a point and either sells the car to pay it off or trades it in on another car that has more manageable payments.
I saw one last week that stunned me. I know the interest rates on these loans can be in the 300% annual range. A person brought two documents in on her title loan. She wanted help to bail it out. The first document was about 10 days old. It had a payoff of about 45,00. The car was repossessed the next day. The second document was the payoff after the repossession, the payoff was about $10,000. How the payoff can double that quickly doesn’t make sense. There were repossession fees included, but only around $300. The only thing reason that makes any kind of sense is if there was a penalty for early payoff included in the loan.
There are a lot of varieties of title loan. I do not know them all. If you are going to get a title loan make sure you have read all the fine print. Make sure you understand what could happen if you miss the payment. I really, really felt bad for the person in this example who lost her car. I hope she goes to the Department of Financial Services who regulate these companies to make sure everything the title loan company did was legal.
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