Everyone goes through periods in life when cash at hand isn't enough to cover expenses. Whether facing a lay off or an unexpected medical expense, if bills are piling up you may be looking at alternative ways to quickly get additional funds. Best advise is DON'T do a Title Loan. Title and Pay Day loans are one of the quickest ways to find yourself in bankruptcy. Best advice is to start an emergency fund for yourself today. Just $10.00 per week is a great start. Start it and don't touch it.
Using your car as collateral
A title loan is a small cash loan that you get in exchange for pledging your car title to the lender. The lender gives you an amount of money and you use your car as collateral for the loan. By pledging you car you are giving the lender the title to your vehicle if you cannot repay the amount of money you borrowed.
Only about a third of states in the U.S. allow title loans. In Kansas, title loans are not permitted but you can set up an open ended credit loan. However, title loans are legal in Missouri for up to $5,000 and Kansas residents may consider taking the short drive to the state border to find a title loan lender.
There are two big problems with title loans. The first is that if you cannot pay back your loan you can lose your car. When you pledge your title to the lender they can repossess your car to recoup their assets from the loan. If you lose your mode of transportation if can become nearly impossible to get to work, which adds to your financial struggles.
Additionally title loans, like all subprime loans, are very expensive. The annual percentage rate (APR), or interest rate, is significantly higher than those of a typically loan. Subprime loan lenders are often referred to as predatory lenders because they are fairly unregulated and target financially vulnerable people. The industry profits on customers who cannot afford to make their payments, offering them rollover loans with even higher interest rates.
The bottom line, title loans can help get you out of a financial pinch, but you will end up paying high interest rates and risk losing your vehicle. These loans should be considered only as a last resort.