The simple answer to are title loans bad is: It depends on the loan terms. The loan terms depend on the lender, although they can vary quite a bit even within the same lender. We have seen some of the larger lenders charge a wide range of rates. This also depends on how you define a bad title loan.
All title loans are expensive when compared to most other loan types https://paydayloansnc.net/ (except for maybe PayDay loans in some cases). So, does the fact that a loan is expensive make it bad? This depends on your specific situation, how long you will keep the loan, and what you are willing to pay for the loan. In many cases, it is not knowing what the loan costs that causes the problem.
What makes a Title Loan Bad?
To determine what constitutes a bad title loan, we will take a look at the most important factors that make up the loan costs, starting with the interest rate; followed by the fees. Transparency is often lacking from title lenders, especially their advertising.
Even the lenders that claim to be transparent advertise rates and terms that are misleading. Typically we have to rely on title lenders for information about title loans, although the Federal Trade Commission has started to provide information online to educate consumers about title loans.
The first factor when determining the validity of a title loan is the interest rate. The interest rate will define the amount you need to pay to borrow the principle. When combined with the fees and principal payments, this is the total loan cost. It is not unusual for some with a $2,000 title loan to end up paying $5,000 or $6,000 before all is said and done.
This, in our opinion, is not a good title loan and should be avoided at all costs. As general rule of thumb, if it costs double or more for a 12 month loan in our opinion that is simply too much. In other words if it costs $4,000 or more for a $2,000 loan, that is not reasonable. Are Title Loans Bad? If they cost $6, to borrow $2,, then yes.
How could someone agree to such negative terms?
If you’re like us, you may be thinking how could someone agree to a $2,000 loan that costs $6,000 to repay? Well, remember, the borrower was under serious emotional stress, with and emergency financial need, when he/she took out the loan and likely did not realize what the actual costs were.
Visit some of the large title lenders’ websites and try to figure out what they charge. Give them a call and ask what they charge. You’ll find it very difficult to get a straight answer. This is why we created our Title Loan Calculator. It gives each of our customers a real time estimate with a payment schedule. Most lenders will not provide this type of information.
Are Title Loans Bad – Title Loan Fees
The next factor to consider when determining whether a title loan is ok are the fees. The only fee that should be associated with a title loan, in our opinion, is the lien fee for the actual costs of the lender recording the lien on your title.
This is a fee they have to pay, and it is not unreasonable for them to recoup this fee from the borrower. Lien fees vary from state to state, but are usually not expensive.
Loan application fees, loan origination fees, processing fees, convenience fees, and others are probably not reasonable. Make sure you get a detailed list of all fees associated with your loan and an explanation of what they are. If the fees add up to a significant amount of the loan costs, you may want to consider another lender.