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Car Title Loans
Car title loans may be a quick way to raise some cash, but precautions should be made to make sure you make your payments on time or you may lose your only means of transportation.
A title loan is a way to borrow money against your motor vehicle. Based on your vehicle's value, a lender determines how much money you can borrow. On average, title loans are 0 to 00, but they may be as high as 00 or ,000. In a title loan transaction, you can keep your motor vehicle and drive it, while the lender keeps the title to your motor vehicle as security for repayment of the loan. Usually, the lender also gets a copy of your keys. If you cannot make the payments on your loan, the lender will repossess your motor vehicle, sell it, and pocket whatever money he or she gets for it. Therefore, before taking out a title loan on your motor vehicle, you should consider the following:
TIPS FOR CONSUMERS
The Amount You Owe
Florida law allows a title lender to charge you a "fee" up to 22% per month on the money you borrow (see Florida Statutes, Chapter 538). This 22% monthly "fee" over one year adds up to about 264% of the amount you borrow which must be repaid. In contrast, interest on a credit card account is usually only about 18% to 21% per year. The following box states the total amount you repay on a loan for ,000 paid off over one year at 22% per month,
TODAY YOU BORROW
OVER ONE YEAR YOU PAY
Although not expressly permitted by Florida law, the 22% "fee," which equates with interest, has been compounded monthly by some title lenders so that you may be charged 22% on the amounts you owe including the 22% "fees" which you have not yet paid. Be aware that if you cannot make the interest payments on your loan, you will end up paying three and four times the original amount you borrowed to get back your title.
Read the Fine Print
Read and understand the entire title loan application/contract before you sign. You should be aware of the monthly "fee" you are being charged, the due dates, amounts and number of payments you must make, and the total amount of money you must pay to get back your title. You should also be aware of the lender's practices if you miss any payment. If you cannot make your loan payments, the lender will repossess your motor vehicle--perhaps if you only missed one payment. After repossession, the lender may offer you a short period of time to get your motor vehicle back if you can re-start your loan payments. Florida law only permits title lenders to charge you for a monthly "fee" which may be up to 22% per month. However, despite no explicit statutory reference, some title loan lenders or persons working in association with them may attempt to charge you for such things like repossession and storage, before your motor vehicle will be returned to you. These extra fees can run into hundreds of dollars.
Consider the Alternatives
On its face, a title loan may seem attractive, especially if you need quick cash or have a problem receiving loans from banks, savings & loans, or credit unions. However, with a title loan you will be charged a hefty "fee" and will run the risk that you will lose your motor vehicle forever, which may be your only source of transportation. Instead of a title loan, you may consider:
* Budgeting for whatever you need;
* Working out an alternative payment plan with the seller or provider of whatever item or service you are taking the title loan out to pay; you should, whenever possible, avoid taking out a title loan to pay for basic necessities like rent or food;
* Contacting a credit counseling service, which may be offered at reduced rates or at no charge depending upon the city or county where you live;
* Loans from friends or family; and,
* Financial relief from charities or other assistance agencies.
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