Car title loans have helped out thousands of consumers in California. Over the past few years we’ve seen many people in need of money to pay a medical bill or other urgent expense. Sometimes there’s not enough cash available to pay for things that need to get done. Title loans are designed for this exact situation and it’s important that we realize how much this financing can help people. On the flip side, there are downsides that come with taking out car title loans here in California. That’s why we only recommend this type of financing for someone that has no other viable financial options. A personal loan or installment loan can sometimes be better but many consumers can’t qualify because of past credit issues or a bad credit report. Let’s get right into why a title loan can be the worst option for some consumers.
Most people understand that title loans have the security of your vehicle backing them. That means if you default of fall behind even one month, the lender can repossess your car. Applicants need to understand this is probably the worst case scenario that involves using a pink slip to finance an online title loan. Not only that, but an online lender can go after you for more money if the value of the vehicle doesn’t cover the cost of the loan. California has specific rules in play that protect consumers in this situation. For example, a lender needs to notify you if they take your vehicle. They also need to allow a certain time for you to contact the lender and pay back the title loan. If the vehicle is eventually brought to auction you will get the proceeds above and beyond what covers the initial loan amount.
Contact your lender if you fall behind on the monthly payments!
Make no mistake, going through a repossession is not a good scenario. Any items left in the car will probably be gone. Some companies will stalk a borrower at all hours just to get access to a vehicle! You don’t want to lose possession of your vehicle over a simple car title loan. There’s also the issue of the remaining monthly payments. Per California state law, the lender can use the proceeds of your vehicle sale to settle the loan. Don’t find yourself in this situation. Another issue at play is that this will be reported to the credit bureaus. Your credit score will reflect these late payments and subsequent loss of transportation. These items will stay on your credit report for years. It can be really tough to get bank loans, home mortgages and car loans with these hits on your credit score.
Another drawback to consider is the amount of interest you’re paying with most online title loans. The state has provisions in place that protect customers by limiting the amount of interest that can be charged. This amount is still very high in California. Some cities and counties also have rules in place. Sacramento for example enforces city wide codes that regulate certain provisions in place by local car title lender. San Diego is in the process of enacting tough regulations as well. Even with these interest restrictions you can still count on paying high fees and finance charges. These lenders need to make money and this type of loan is often seen as high risk. The larger companies want to insulate themselves from risk and thus charge high finance charges to cover the cost of repossessions and legal fees. Do your best to mitigate these risks. We all know that certain issues will arise throughout the life of the car title loan. Many of these we have no control over. We do have control over the amount of money we borrow and the initial terms that are set. Do yourself a favor and borrow as little as possible. Pay your loan back quickly and the downside will have limits. In most parts of the state like Los Angeles and Anaheim, it’s tough to find online loans. However, some car title loans will work for people who understand the risks and follow reasonable lending recommendations.
Having lived and worked in California his entire life, Robert has a strong appreciation and understanding of online lending. He’s managed teams of sales agents and customer service reps for a local title loan company and fully understands how important it is to respect and listen to his customers. He’s approaching 8 years in the title lending industry and looks forward to helping consumers all across the state.