A title loan (also known as a title pawn) is another means for people with bad or no credit to access a quick cash advance. This can seem like a great option for those that are in need of cash quickly, as there may be no credit check and the application process is typically short.
But although it is often advertised as being convenient, its potential results can be disastrous.
How They Work
You approach a title loan lending company and offer your car for collateral against the money that it will lend you, which is anywhere from 25-50% of your car’s value.
Once the lender has approved you, it will copy your car key and title (which the company will keep until you pay it back). These short-term loans are usually 30 days, and you have to own your vehicle outright (meaning you can’t still be making payments on it).
How is a title loan dangerous?
These types of quick cash loans come with higher interest rates than the traditional types of credit (like a bank loan or credit card). Much higher. In some instances, the Annual Percentage Rate charged by some title loan companies can be as high as 250%!
Companies also can charge for added extras. Things like roadside assistance, processing fees, document fees, late fees, origination fees and lien fees are all common additions for these types of companies. Some will even charge a repossession fee.
Loan Roll Over
If you cannot pay the loan back within the loan period, then the amount owed may “roll over.” This roll over changes the terms of the agreement—in the lender’s favor—and the borrower will receive additional fees, as well as a higher interest rate. Sometimes those fees can be more than originally borrowed.
If borrowers miss even a single repayment, they run the risk of losing their car (or whatever they put up as collateral).
Title loans are short-term solutions that can have far-reaching effects. Losing your car can impact your ability to earn a living, and create a negative cycle of debt that you can’t recover from, which leads to owing way more than the original loan.
If you are a structured settlement annuitant or prize payment winner, you have an alternative to title loans. Your guaranteed payments mean that in many instances you can receive cash advances and loans if you have a short-term financial need or emergency.
Contact one of SenecaOne’s dedicated Prize Payment or Structured Settlement Specialists today. Helping you to solve your immediate financial need as quickly as possible with no hidden fees, additional costs or obligations is another reason that we remain Your Trusted Source®.