If you own your own automobile and have no liens against it, you qualify for an auto title loan. If you need fast cash during a financial crunch and can't get a traditional loan, open or extend a line of credit or borrow money from friends or family, title loans may be your only alternative.
Most title loans have very high interest rates and other expensive fees, but you can get one with less risk and fewer fees if you know what to look for.
The key to getting the best deal with the least risk is to shop around. Don't hit the panic button and take the first title loan you see. Even if you need cash for an emergency, you should still have enough time to find out some simple facts. Call some local lenders and Google the top 10-20 title loan companies online. Compare the various interest rates and fees between companies and choose the lender that has the best rates.
As a borrower, you should only take out the funds you need and no more. You should never take out a title loan if you aren't certain you can pay off the loan in full at the end of the loan period. If you have to rollover the loan, you'll pay a lot more in interest and fees. Would you like to spend $750 on a $250 loan? Some consumers have.
If your loan will be paid back via a direct deposit from your bank account, make sure to find out on what date the funds will be withdrawn from your account. If you don't know when your account will be charged, you could end up with a missed payment or a costly overdraft fee from your bank.
Even if you don't expect to miss a payment or rollover your loan, you need to know what additional fees each lender charges for every rollover. Some lenders also put a cap on the number of rollovers they'll allow.
If you don't have enough money to pay the loan and all the additional fees during the final rollover period, you may end up defaulting on your loan. If you default on your title loan, your car could also be repossessed. Losing your automobile is the biggest risk for anyone who takes out these loans.
You need to find out exactly what the lenders’ policies are in case you miss a payment or default on the loan. It's wise to always plan ahead according to Murphy's Law -"Anything that can go wrong will go wrong. "
As a consumer, you can demand full disclosure of all charges and the annual percentage rate (APR). This includes all policies regarding the possible repossession of your automobile. Make sure you understand all the loan terms and get them in writing before you sign the loan.
The more you shop around, the easier it will be to make an informed decision as to what title loan is right for you.
John Campbell is the writer and editor of CashBuzz , A financial portal for the rest of us. Check out cashbuzz.com for the latest articles on money management and tips and tricks that can help improve your finances. This article may be reprinted on your Web site if the copyright, author information and active link are included.