Business and Personal Finance Dictionary

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• TITLE LOAN
  
  A title loan is a fast cash opportunity for financially strapped consumers who are desperate for money and willing to risk the property they own to qualify for a quick loan. Typically, title loans are intended to be short-term loans that can be paid off within thirty days, maybe with your next paycheck. They are contracts secured by the "title", a paper which proves that you have the right to possess or you actually possess ownership of a property, like your car. When you secure a title loan with this proof of ownership, it guarantees the lender that, if you default on the title loan, the title loan lender can be the new owner of your property, usually your car. They can keep the car, repossess the car, and even sell the car without your permission, which is why title loans are risky. Even if your car is more valuable than the loan, it still means that the lender will have the keys to your car. You can lose it all. If a title loan still seems worth the risk, there are safeguards that you should employ. First, if you are a cash strapped consumer, you may be lured by title loans which make money seem almost free. However, title loans come with interest that compounds at the steepest rate allowed, even increasing by one third or more yearly. You must be very clear about the interest which accrues in title loans, even to the point of calculating the amount to the penny. Title loans are costly. Second, each state has laws which regulate title loans, as well as the credibility of lenders. Do NOT sign any title loan without clearly understanding what you are agreeing to. The "amount financed" is the amount you are borrowing. The "interest rate" is the percentage of extra money you will be required to pay the title loan lender for the privilege of using his quick cash. Look for the worst case scenario: what will happen if you can't pay the title loan as agreed. For instance, title loans should say exactly what the lender will do with your property. Will the title loan lender tack on an additional charge for repossession and sale? Will you have a chance to hand your vehicle over so that you can clean out your possessions or will it be repossessed without your knowledge? Will you have a chance to pay at the last minute and "buy back" your car? Does the lender have any obligation to warn you before your car is repossessed? Either get the facts you need from the title loan lender or your state department of Financial Services which protects you from title loans that seem more like piracy. Title loans can be the beginning of a financial nightmare.
  
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