Just imagine you got your credit card statement in the mail and you cannot afford your minimum payment. You need a bit more money so you can pay your bill, so you turn to a car title loan company. You fill out some paperwork and you use your car’s title as collateral. It’s a simple way to get some money, so what is the problem?
Car title loans are short-term loans, which means that a borrower has to pay back the loan in its entirety relatively quickly and usually within a month. If he or she doesn’t, triple-digit interest rates will kick in, as well as fees to carry the loan over to the next month. By the time someone is done paying off a car title loan, he or she could have paid up to $4,000 for a $1,000 loan.
Though people in Dallas can’t just ignore their bills, just because they can’t afford them doesn’t mean a car title loan is the only option available. A bankruptcy attorney can help to negotiate a debt settlement with a credit card company, for example, which would give an individual more time to pay the bill. If the debt is overwhelming, an attorney can discuss bankruptcy, both its positive and negative aspects.
Some people who do get car title loans choose not to pay the loan back. Whether it is the high interest, the fees, or he or she is just not able to afford it, refusing to repay the loan means the lender can take possession of the car.
Source: AARP, “Car Title Loans May Wreck Your Finances,” Lynnette Khalfani-Cox, Jan. 17, 2014