Interesting Facts About Car Title Loans
A car title loan indicates a loan where the borrower uses his vehicle as collateral. This type of loan is particularly popular in the US where the borrower can get the money in 15 minutes or less. The amount of loan can be a paltry $100 and if one goes by the regulations of the Illinois state, can go up to $4000. Why the borrower prefers the quick money, stems from the fact that his credit history is not checked and the money is available almost immediately.
If you go to a financial institution for the car title loans amount, they will verify a lot of parameters and may not lend you anything less than $1000. The money would be delivered to you after the loan sanction is through. The borrower's do not get into the time consuming hassles and instead approach the lenders for their short term loan requirements.
The lenders charge a very high rate of interest and include finance charges as well as they treat the loans as unsecured with a high risk of default. While a credit card loan may cost 36 per cent with a repayment over a year, the car title loans can end up with finance charges going from 40 to more than 100 per cent. The borrowers thus end up in paying more in finance charges as compared to the original amount in some cases. To learn more interesting facts about car title loans, you can visit https://en.wikipedia.org/wiki/Payday_loan.
As a modus operandi the borrower submits the title of his car to the lender. The hard copy is used by the lender to place a lien on the car title. When the borrower repays the loan, charges and the interest amount in full, the lien is removed and the car title returned to the borrower. In case of a default the lender goes in for repossessing the vehicle and sells it to recover the outstanding debt.
In a research conducted in the prominent city area in the state of Illinois it was discovered that almost 18 per cent of the borrowers of the car title loans lose their vehicles due to the loan repayment defaults.
This is despite the fact that they take fresh loans to pay of the previous debts. This cycle of debt continues despite problematic finances of the borrower. This practice also constitutes almost 21 per cent of the total loans. Since the borrower is mostly paying the interest amount, the principle hardly gets paid off. The finance charges result in the final cost of the loan going up and out of repayment capacity of the borrower.
