‘Tis the season for holiday shopping and the temptation of title pawns. From Black Friday to last-minute purchases, holiday shopping and gift-giving can put a strain on your pocketbook. And don’t forget to factor in decorations and parties. Each year the holiday season seems to become more extravagant and expensive. In fact, industry experts expect the average American to spend $920 per person on holiday gifts, up from $885 in 2018, and reaching a total of more than $1 trillion in holiday spending this year.
While some can afford this type of spending, others struggle to keep up and may be tempted to apply for a title pawn or loan. If you’re considering a title pawn to cover holiday expenses, it’s important that you consider what it may cost you in the long run as well as alternative financing solutions.
Below, we will go over what a title loan is, how it works, the consequences of title loans, and alternative solutions.
What is a title loan?
First, let’s clear up some terminology confusion. A title pawn and a title loan are actually the same things. The terminology used varies from state to state. Plus, people often confuse the term “title pawn” with pawning items at a pawn shop.
A title loan or pawn is a type of secured loan that uses a vehicle title or other asset as collateral to secure a loan. Individuals are often tempted to use title loans because they are relatively easy and quick to obtain. For instance, one’s credit rating is not taken into consideration when determining qualifications. Plus, the title loan can be approved quickly for amounts as low as $100. However, loan companies will usually lend up to 25 percent of the asset’s total value.
Car title loans are the most common forms of title loans. To obtain a title loan, the borrower must own the car outright and sign the title over to the title company in case of default. These loans are usually for less than 30 days.
Consequences of title loans
While title loans can be attractive to people who need cash fast but are in tough financial situations with bad credit, the cost and consequences of title loans can be burdensome. If the borrower fails to repay the loan as agreed upon, the title company can repossess the car or allow the borrower to make interest-only payments for one-month periods.
Unfortunately, however, the interest rate on car title loans is often higher than 100 percent interest and can be as high as 300 percent. Losing an asset to repossession or facing this high-interest rate can cause one to fall even deeper into debt. After all, taking on debt to pay off debt can put you into a dangerous cycle of debt.
Alternative financing options
Because of the above consequences, the attorneys at Tolar & Tolar advise individuals to consider alternative financing options before resorting to a title loan, such as:
- A payday alternative loan from a credit union
- A personal loan from a smaller bank, credit union or online lender
- Asking someone to cosign on the loan
- Asking your employer for a paycheck advance
- Seeking assistance from local nonprofits, charities and religious organizations
- Asking family and friends for a loan through lending circles or a loan agreement
- Finding other ways to make money
Why Tolar & Tolar, Attorneys at Law?
Are you facing repossession or dealing with a title loan with a high-interest rate? The attorneys at Tolar & Tolar are here for you. We will help you evaluate financing options, stop repossession, and get the interest rate down to a manageable amount. We never want to see someone lose their car or other assets, so we do everything we can to help make sure that doesn’t happen. We can help you file for chapter 7 or chapter 13 bankruptcy, too. Being a father/son law firm, we value the things that matter most to you.
Learn more about Tolar & Tolar Attorneys at Law
At Tolar & Tolar Attorneys at Law, we have years of experience helping other people get themselves back on track – giving them a new and brighter economic outlook. We would appreciate the opportunity to do the same for you. Let our family help your family!
Serving people in Millbrook, Auburn, Prattville, and Tallassee, we are your local solution to make the tough times easier. Contact us today to set up your free consultation!