What Information Should I Look for if I Apply for a Payday or Title Loan?

What Information Should I Look for if I Apply for a Payday or Title Loan?

Car title loans are expensive. Title loans usually have an average monthly finance fee of 25%, which translates to an APR of about 300%. Title lenders often add other charges to the loan amount, like processing, document, and loan origination fees. You also may have to buy add-ons, like a roadside service plan. If you have to pay added fees and buy add-ons, the cost of your loan will be higher.

  • You want to borrow $1,000 for 30 days.
  • The finance fee is 25%. That means that you have to pay $250 to borrow $1,000.
  • You give the lender the title to your car, and the lender gives you $1,000 in cash.
  • When it’s time to repay the lender in 30 payday loans Ohio Marietta days, you must pay $1,250, plus any other fees the lender charges.

Costs increase with rollovers. Like with payday loans, if you can’t repay a title loan when it’s due, the lender may let you roll it over into a new loan.

  • Using the example above, on the original due date you don’t pay but instead roll over the 30-day, $1,000 loan for another 30 days. The rollover will add another $250 in finance fees, plus any other fees, to the amount you owe.
  • That $250 is added to the $1,250, you already owe, so now you owe $1,500, plus any other fees that the lender may charge for the rollover.
  • The rollover brings your cost of borrowing $1,000 for 60 days to at least $500.

You can lose your vehicle. If you can’t repay the money you owe, the lender may repossess your vehicle, even if you’ve been making partial payments. When you get the loan, some lenders insist on installing Global Positioning System (GPS) and starter interrupt devices so that they can locate the vehicle and disable its ignition system remotely, making repossession easier.

Once the lender repossesses your vehicle, they can sell it, leaving you without transportation. In some states, lenders can keep all the money they get from selling the vehicle, even if they get more than you owe.

Federal law treats payday and title loans like other types of credit: lenders must tell you the cost of the loan in writing before you sign the loan agreement. They must tell you the finance charge, which is a dollar amount, and the APR, which is a percentage. The APR is based on how much money you borrow, the monthly finance charge, the fees you’ll have to pay (like processing fees, document fees, and other charges), and how long you borrow the money. Use the APR to compare the cost of borrowing money from different lenders. It’s the clearest way to see how expensive a loan is.

Be sure to read the loan agreement carefully to see if there are other costs or fees. These can include late or returned check fees. There also may be fees to roll over the loan.

But rolling over the loan will add more interest and fees to the amount you owe

Also, check with your state attorney general or state regulator about payday and title lending laws in your state. A number of states protect people from high-cost payday lending with small loan rate caps or other measures. Many states also require lenders to be licensed if they operate in the state.

Possible Alternatives to Payday and Car Title Loans

  • Ask your employer for a paycheck advance. Your employer may be willing to give you money you’ve already earned but haven’t been paid. For example, if you’ve worked seven days but your next scheduled paycheck isn’t due for another five days, your employer might be able to pay you for the seven days. This is not a loan. It will be deducted from your next paycheck.
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