22 Mar 2017   /   0 comments

The Risks of Title Loans

Paul

pexels-photo-147430If you are considering an auto title loan, you may have worries because you have heard people talk about the risks of title loans. Here, at TFC Title Loans, we recognize your worries and we want to help explain fully the risks and disadvantages that are associated with Car Title Loans. We are not like other lenders, we don’t try to hide the risks from our customers. As a company, we are strong believers in consumer education and lender transparency. We want you to make the best decision for your situation. When we have happy customers then we have a successful business model. We don’t want our customers getting into any kind of loan contract without knowing all the risks associated with it.

There are particular dangers that are associated with car title loans which aren’t typical with other kinds of loans that are more traditional, such as those lent by banks. This is because Car Title Loans aren’t dependent on your credit score; instead they are secured loans which use your car as collateral for the loan. Since auto title loan lenders work with a lot of sub-prime borrowers the risk is higher that the customer will either default on the loan or make late payments. This increased risk dictates that the lender charge a higher interest rate to make up for the higher risk posed by the borrower’s credit score. Usually, when there is an increased risk for the lender there is an increased risk for the borrower as well.

Ever since we first opened our doors in 1994, we have been very passionate about helping out those people who can’t find help anywhere else. It is an unfair system that judges individuals based on a singular number then does not give them the opportunity to improve upon that number. We can help you even if it is a higher risk for us. But it is very important that you understand the increased risks that you will be taking on before applying for a car title loan. We want to see you succeed, not only in paying off a title loan or raising your credit score, but in all your personal finances.

Risks of Title Loans

  • Higher Interest Rates

Since there is a higher risk for the lender when giving out a loan to a borrower with a less-than-perfect credit score, Car Title Loans tend to have higher interest rates to make up for the increased risk. This means you could end up paying more back than you would with a typical bank loan.

  • Repossession Possible

Car Title Loans use your car as collateral for the loan so if the loan was to be defaulted on, then the lender would have no choice but to repossess your car in order to get the money back that they lent out. If this must be done, lenders sell the car at auction and end up getting less than they would have if the borrower had not defaulted, so this is undesirable for both parties.

  • Shorter Payback Times

Many Car Title Loans have shorter payback schedules than the typical bank loan. There are some lenders that require the loan be paid back in just a few months which can make the payments astronomical.

  • Payment Fees

If you miss a payment or a few then the late payment fees could really start to stack up over time making it harder to pay the loan down. Some lenders also charge prepayment penalties so that the borrower will have major balloon payments at the end of the loan.

TFC Title Loans Tries to Minimize the Risks

  • Sliding Interest Scale

We have a product which can decrease the higher interest rates common to title loans through sliding scale interest rates so each loan can be customized to the customer’s unique situation.

  • Excellent Customer Support

If you are struggling to make payments, all you need to do is reach out to our customer support team here, at TFC Title Loans, and we will figure out a way to help you through the process without your loan defaulting.

  • Longer Payback Terms

We customize our loan terms for each customer with a payback timeline between 24 and 36 months so that the monthly payments are affordable.

  • No Prepayment Penalties

We charge absolutely no prepayment penalties so you can pay back the loan as early as you like. If you decide to pay it back early, then you can avoid building interest.

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