The tightening of the credit markets over the past five years has made it very difficult for most people to obtain traditional personal loans. As opposed to taking out personal loans from a bank, many people are now taking advantage of title loans and other less-traditional types of financing. While these types of loans can help you through a difficult financial situation, some people become victimized by predatory lenders and can end up worse off financially than when they started. For those who would like to take out a title loan, here are some tips to help you avoid trouble.
Understand all Costs and Fees
To avoid being victimized by predatory lending, you need to understand all costs and fees associated with the loan. Title loans have a reputation for being expensive, but the total costs can vary significantly from one lender to the next. While a lender may advertise a certain interest rate, you won’t know the full costs you’re being offered until you read the fine print. Reading the full loan document will give you information about the interest rate and any additional fees you will be charged. Reading the document will help you dodge any surprises that come with the title loan.
Know the Risks
Along with knowing the total costs, you also need to know what will happen if you don’t and/or can’t repay the title loan on time. The fine print of the loan document will detail what the lender’s rights are if you start to fall behind on payments. The rights of the lender can include the ability to charge higher interest rates or fees, or even the right to seize the vehicle. If the risks of the loan seem too extreme, or if the lender has the right to act on the collateral quickly, you may be dealing with a predatory lender.
Do some research on the specific lender you are thinking of using. Prior to taking out any loan, you should read about the lender online through various consumer report websites. This should give you a comprehensive understanding of whether the company has a good reputation, is known to charge excessive fees, or seize the title to the vehicles. It would be wise to choose a lender that has a decent reputation with customers and has a history of compliance with consumer laws.