Cash advances are not a new concept in America's brand of capitalism. Many people have seen the commercials with some guy barking out, "Bad credit, no credit, no problem!" Or, "Don't worry about credit, I own the bank!" Anytime some guy is telling you he owns the bank, run.
Even though these lenders have been around for a while, signing your car over for a high-interest loan has become a serious financial issue. For those of you who are unfamiliar with the concept of car title loans, allow us to explain. At times, the best of us get strapped for cash; we may have no credit or bad credit (just like they say in the commercials), which keeps us from getting small loans from a bank or some other more traditional means. A title loan offers you cash from the lender, in return you sign over the title of your paid-for car to secure the loan. Typically, these loans are due back in full 30 days later. There's no credit check and only minimal income verification. It sounds pretty straightforward, but borrowing from these places can lead to a repossession of your car and a whole lot of financial trouble. Interest rates that make credit card companies blush
Car title loans have been lumped into the "predatory lending" category by many consumers. Non-profit organizations such as Consumer Federation of America (CFA) and the Center for Responsible Lending have issued detailed reports outlining some of the title loan issues that the public should be leery about. One of the biggest issues with these loans is interest rates. Many people dislike credit card interest rates, which average between the mid to high teens for most Americans. Car title loan interest rates make complaining about credit rates seem ludicrous. Car title lenders are in a different category than credit card companies or banks and work around usury laws. Thus, title loan lenders are able to charge triple digit annual percentage rates (APRs). Yes, triple digits. It's not an...