How can a car title loans save your home

How can a car title loans save your home? The quick answer is that car title loans can’t save your home. Unfortunately the use of car title loans has exploded in recent years and although we are willing they might have their specific and very limited uses, car title loans are not the easy, practical panacea ruthless car title loan dealers try to make us believe. This article will attempt to explain what car title loans are and how they might affect your credit score and your home loan. Car title loans are of course not the only type of fast cash loans that are cropping around the world. Payday loans are also similar in nature to car title loans preying on the same population groups with similar tactics. The only way to protect ourselves from these pseudo-usury mechanisms is by knowledge and understanding on how they work.

What are car title loans? Car title loans are “emergency” loans for people with bad credit and no family and friends to help them out or too proud to ask. The common interest rate for these “loans” is from 200 % to 300 % A.P.R. That is 300 % of average annual interest.

Let’s try and digest what that means in the real world with an example. Imagine you need cash for an emergency, you are broke, have no useful credit rating and your only valuable asset is your car. So you take it into your local friendly car title loan office and borrow 1000 $. Your loan “advisor” explains that if you pay by the end of next month you will have to pay a 250 $ interest fee on top of the capital.  That seems a little expensive for you, but you really need the money and you have some money coming in from a building job you did last week. The problem is that you need the money now and you will be damned if you are seen asking for loans to your in-laws or friends. The only problem is that the month goes by and the money you were expecting hasn’t arrived yet. You drive down to the car title loan office and explain the situation. The dealer says: “no problem, we’ll roll it over to next month”. This means you now owe the 1000 $ plus 500 $ plus a roll over fee of let’s say 50 $.  It is easy to see how a loan of these characteristics could quickly get out of hand as it often does. It is not rare for borrowers to extend loans like this up to a year, which means they have to pay back 3,000 dollars for their 1,000 dollar loan. In many cases they cannot afford the payments and lose their car, what often is their only means of transport and therefore of making a living.

Car title loans have interest rates that can only be called usury because there is no other interest rate to compare them with. To illustrate this, compare a 300 % interest with credit card rates which are down in the 16 % to 22% level. How bad does a loan have to be to make credit card rates look ridiculously cheap?