Auto title loans are short term loans, mostly for thirty days. Such a loan is secured by the title of your car, meaning that if you are unable to pay borrowed money within the stipulated time, the lender can rightfully take possession of your car and sell the same to recover the loan. Usually, you can avail this loan only if there is no other loan pending against your car.
How does it work?
Lenders frequently prefer dealing with military personnel, the elderly and people with low credit score or low income. They make money mainly due extremely high rate of interest and taking possession of cars for which the borrower is unable to pay.
The usual monthly rate of interest is 25 %, which works out to 300% per annum. Typically, lenders provide loan for a maximum of thirty days. It means on borrowing $600 for 30 days, you’ll have to pay $750 and if you are unable to pay, the lender may extend the loan by another 30 days provided you pay one month’s interest, meaning $150. The amount due for the following month remains unchanged to $750. Often, borrowers are unable to pay back the loan amount in full. As a result, the interest keeps piling up at that high rate. This is called rolling over or flipping.