March 1st, 2010 by Reed Allmand 
When debtors take out a car title loan it’s usually because they feel that they have run out of options. A car title loan allows them fast access to money for 30 days; but unfortunately at a high price. Car title loans have interest rates that can climb as high as 25 percent per month. Car title lenders will loan the debtor a small amount of cash in exchange for a promise that if they don’t repay the loan, the lender can take the car. But what happens most often is that debtors pay on the loan for months and end up sometimes paying more than their car is worth.
For example let’s say a debtor takes out a loan for $600 on March 1st with a repayment term of 30 days. Let’s also imagine that the interest on the loan is $150. At the end of the 30 day term the debtor would owe $750. If they cannot repay the full amount, the lender will accept the interest payment of $150 and rollover the debt to the next month. What this means is that the debtor would owe $750 next month. The lender is only allowed to rollover a debt 6 times and most debtors don’t pay off their loans immediately. Let’s say that the loan was renewed 5 times. After five months of only paying the interest on this loan, the debtor would have paid $750 in interest payments alone, never paying down the balance. If at that point the debtor decided to pay off the loan they would pay $1350 for a $600 loan.
It’s this type of indebtedness that can push a debtor deeper into financial problems. You may be able to discharge car title loans in bankruptcy; but please speak with you bankruptcy attorney about the details of your case. Before you take out a car title loan please consider that losing your car to a car title lender could leave you without a way to get to work and eventually without a job. And even if you are somehow able to repay the lender, that is real cash that could have been used in better ways.
About Reed Allmand
Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."
View all posts by Reed AllmandSubscribe
Subscribe to our e-mail newsletter to receive updates.
