4 Alternatives Way Cheaper Than Auto Title Loans

auto title loans

If you’re in the middle of a financial emergency, you’re not just concerned about paying an unexpected expense. You’re also worried about how that expense will hurt your chances of putting food on the table or making your next rent payment.

If you have bad credit, auto title loans are a way to get quick cash when you need it. But with predatory fees and high interest rates (not to mention the chance of losing your car), auto title loans are almost always more trouble than they’re worth. Here’s why.

How do auto title loans work?

Borrowers who are looking to get cash fast can head to a local lender with their car and title in hand. Lenders require that you own the car outright, so it won’t work if you’re still making payments on the car.

The lender appraises the car and makes a loan offer, typically 25 percent to 50 percent of the appraisal value.

If you complete the application for an auto title loan and get approved, you leave the title with the lender as collateral. Then you walk out the door with a check and typically have 15 to 30 days to repay the loan in full. Some auto title loans are repayable in installments, however.

In the event that you don’t pay back your auto title loan, the lender can repossess your car and sell it to pay off the debt you owe. What’s worse, in some states, if the lender gets more from the sale of the car than the amount you owe, it isn’t required to pay you the difference.

High interest rates lock you into a cycle of debt

Although APRs for auto title loans aren’t as high as APRs for payday loans, high interest rates and fees can result in triple-digit APRs. That’s why it’s no surprise the Consumer Financial Protection Bureau (CFPB) found the following in a recent study about auto title loans:

  • Eighty-eight percent of single-payment auto title loans aren’t repaid on time. To avoid repossession, most borrowers take out a new loan to pay off what’s due on the auto title loan.
  • More than half of those who reborrow end up taking out four consecutive loans or more. Additionally, two-thirds of all auto title loans go to customers who reborrow six times or more.
  • Twenty percent of borrowers who can’t repay their single-payment loan on time lose their car to repossession.

In other words, the cards are stacked against you from the get-go.

New regulations offer some protection against auto title loans

The main reason borrowers get sucked into long-term debt with auto title loans is lenders haven’t required borrowers to prove they can afford to repay the debt.

The CFPB solved that problem in part when it issued a final rule in October 2017. The rule applies to certain auto title loans with repayment terms up to 45 days and requires lenders to:

  • Assess the borrower’s ability to repay the loan (previously, no proof of income was required)
  • Offer smaller subsequent loans
  • Restrict total indebtedness to 90 days

With the new rule in place, it should become harder to get approved for an auto title loan if you can’t afford the payments. Although that means your options are even more limited now, it can prevent your financial situation from getting worse.

The rule doesn’t apply to auto title loans with repayment periods longer than 45 days, however. So, auto title loans with an installment repayment plan won’t be affected.

4 cheaper alternatives to auto title loans

When you need cash now, the conventional advice to cut back on expenses and save doesn’t provide immediate relief.

If you have bad credit, there are several ways to get the cash you need without putting yourself in a precarious position. To avoid getting sucked into a vicious cycle of crippling debt, here are four ways to get quick cash.

1. Sell some of your possessions

If you have stuff you no longer use or need lying around, consider putting it up for sale on Craigslist or Facebook Marketplace. Selling old cellphones, unused gift cards, and items sitting in storage can help you rack up extra cash fast.

2. Get paid for extra work today

Companies such as LaborWorks, Labor Finders, and PeopleReady can help you find day laborer jobs that pay at the end of the day or week. If these companies aren’t available in your area, check out the gigs section on Craigslist to find opportunities nearby.

If you already have a day job, consider asking your employer for an advance on your paycheck. If that doesn’t work, Earnin might be able to help.

Earnin offers payroll cash advances for work you’ve already done but haven’t been paid for yet. You repay the advance when you receive your next paycheck. And here’s the best part: You don’t have to pay fees or interest. The company simply asks that you pay what you think is fair for the advance.

3. Ask for help

If you have family members or friends who can spot you some cash, don’t be afraid to ask. But keep in mind that a bad exchange can damage your relationship, so avoid taking advantage of them.

You also can reach out to creditors to see if you can get a forbearance on your bills for a few months. Then you can take the cash you would’ve used to make your monthly payments and put it toward your emergency expense.

4. Consider a personal loan

You might think personal loans require a good credit score, but some companies specialize in personal loans for people with bad credit.

For example, Avant has a minimum credit score of 580, and OneMain Financial doesn’t have a minimum credit score. The interest rates for these loans can be high but nowhere near as high as interest rates for auto title loans. Also, their repayment terms are more flexible, giving you more than a month or two to pay off the loan.

Just be sure to do your research so you know what you’re getting yourself into.

Avoid auto title loans at all costs

With so many other ways to get cash fast, most people shouldn’t even consider auto title loans as a last resort. As the data shows, the predatory nature of these loans puts many consumers in a worse financial position than they were in previously.

If you’re already stuck in the vicious cycle of debt these loans create, consider using one of the alternatives above to pay off your debt so you can get back on track.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal LoansFixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 4.98% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 21, 2017 and are subject to change without notice. Not all rates and amounts available in all states. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 4.98% APR assumes current 1-month LIBOR rate of 1.34% plus 3.89% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
4.98% - 14.24%1$5,000 - $100,000
Check rate nowon SLH's secure site
8.00% - 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
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