Be Careful of Title Loans

October 8, 2012
Many Americans today are living from paycheck to paycheck. To make matters worse, the majority of consumers have little or no savings to rely on when an unexpected financial emergency occurs. The car title loan industry has seen massive growth over the past few years mainly due to just these reasons.

In the current financial climate, individuals with poor credit have very few choices when it comes to borrowing money. Traditional lenders such as banks and credit unions now have much stricter rules and regulations governing their lending practices than before the financial meltdown several years ago. Consumers who could previously qualify for a personal loan from their bank now are being turned down for additional or new credit.

A car title loan is a totally different type of loan. It is a short-term loan which means it has to be repaid in a very short amount of time (generally four weeks). It also is a secured loan. The borrower puts up his or her vehicle as collateral for the loan. In this way, car title loan lenders are protected. It doesn't really matter to them if the borrower has a poor credit history or even a bankruptcy on their credit report. They know if the borrower defaults on the loan (cannot repay the loan when it is due) they have the right as the legal holder of the loan to repossess the vehicle and sell it to satisfy the terms of the loan.

There are many reasons to be extremely cautious when considering a car title loan. Here are some important facts to think about before making a final decision:
  • Interest rates can be unreasonably high (400% or higher is not unheard of).
  • Car title loan lenders target consumers who have poor credit and little or no money-management skills.
  • Car title loans are generally given for only 40%-60% of a vehicle's estimated value.
  • Losing your vehicle is a very real possibility. It is estimated that with some car title loan lenders, the repossession rate is 13%. This translates to one in eight borrowers having their car repossessed because they are unable to repay their loan.
  • The average car title loan borrower takes out 3-5 loans from a specific car title loan lender. This indicates that most borrowers are unable to pay off their original loan within the four week repayment period and must renew the loan more than once.
  • Borrowers who must extend their car title loans face additional fees and interest charges for every four week renewal period. This can result in an overwhelming cycle of debt which is hard to overcome.
Borrowing money is always a serious matter and should be approached with caution and good sense. For consumers who have a pressing financial need that won't wait until the next payday, car title loans can provide a quick influx of cash with very little paperwork or hassle. But you should remember that car title loans differ from other types of paydays loans in one very important aspect- they are secured loans. If you are unable to repay the loan, the lender has every right to repossess your vehicle. That's a very real possibility and one worth considering carefully.

Car Title Loan Companies- The Good and the Bad
If you are seriously contemplating taking out a car title loan to help you get through a tough financial situation, here are some suggestions that would be smart to consider.

  1. Always borrow the least amount of money possible. This is a good rule to follow no matter what type of loan you are seeking. Car title loans, in particular, have a very short repayment period. You should be confident that you will be able to fully repay your loan in just four weeks time.
  2. Try to negotiate the lowest possible interest rates. Occasionally car title loan lenders will allow some negotiation of terms and conditions but you should still be prepared to pay very high APRs and fees. You can control this somewhat by only borrowing what you really need (see above).
  3. Car title loans should be used for emergency financial situations only. Short-term loans such as these are not designed to solve long-term debt problems. Consider less risky borrowing options or seek credit counseling if you are dealing with overwhelming debt.
  4. Look for car title loan companies with high approval ratings from customers. Do some Google research and investigate companies before choosing a specific lender. It is your responsibility to be an educated consumer when making serious financial commitments. If you make the decision to use a car title loan for your immediate cash needs, be certain you review and understand the contract you are signing.

Here are three car title loan companies which have good consumer ratings. They are highly respected within the car title loan industry.
  • is considered one of the industry leaders in car title loans. This company primarily operates out of Nevada and the Southwest but it does offer an online application also. Loans are generally given in amounts from $100 to $5500. Applicants normally receive their cash funds quickly (within 15 minutes) because there is no complicated paperwork involved or credit checks performed.
  • is an online car title loan lender that enjoys a very high success rate with their customers. This company also operates storefront locations mainly on the East Coast from Atlanta to Boston. An applicant simply fills out and submits the online application form. A representative then contacts the individual to work out the loan details. The entire process is quick and easy. Loans are usually approved for amounts between $500 and $50,000.
  • rounds out the top three of the most highly rated car title loan companies. It was this country's first nationwide car title lender and has been in business for over 75 years. It has offered online car title loans for the past 15 years. Once an applicant submits an online application, the company boasts that it only takes 15 seconds to have an approval decision. allows a customer to borrow up to 50% of the wholesale value of their vehicle. Bad credit is not a factor in the approval process.
Consumer research indicates that the car title loan company to avoid is Wilshire Consumer Credit, working in conjunction with EZ Loan Lookup. Numerous individuals stated that the application process, including research and documentation, sometimes took more than 5 days to complete. Also, paperwork was frequently lost altogether and applicants were called multiple times during the day by many different people representing the company. Each person was attempting to get duplicate copies of the required paperwork.

Don't make a hasty choice when it comes to car title loans. These loans are high-risk and extremely expensive. They also come with many pitfalls- the most serious of which is you can end up losing your vehicle. Take the time to do some research and consider your personal financial situation carefully before making this important decision.