Car title loans: the facts

© Ed Yourdon (Flickr) They told me a car like this would be a magnet for sexy babes. But so
© Ed Yourdon (Flickr)
Eligibility criteria for car title loans
Citizenship
You must be an American citizen.

Age
Most lenders will accept the application of youngsters over 18, but some will only deal with customers who are over 21.

Affordability
You’ll normally be expected to provide a copy of your wage slip or prove that you can afford to repay the debt.

Car title
You’re expected to bring along with you an original copy of the car title to prove ownership.

Car financing
You must have cleared at least 75% of any outstanding car finance. Some lenders expect outright ownership of the automobile.

Valuation
The value of your vehicle will either be based upon a blue book value or determined by an internal expert. You won’t be able to borrow all of the equity, just 40% to 50% of the estimated net worth of the car.

This is to ensure that there is enough money to cover any interest that accrues or to allow you to renew the agreement (if necessary).

Identification
You’re expected to provide two forms of ID, one of which must be photo identification. Suitable documents include your passport, driving license, bank statements or a utility bill that is less than a year old.

Car keys
The lender may produce a duplicate set of car keys. If you default, it’s easy for them to repossess your car.
Consequences of defaulting on auto title loans
Cost of borrowing
You should normally expect to pay $25 to borrow $100 for a month. However, some states have capped cash for car title rates, e.g the maximum APR in Iowa is 35%.

Repossession
If you default on the agreement, the lender can repossess your vehicle. Many a borrower has driven to work, only to find their car has been repossessed by the time they leave. That’s why 75% of lenders keep a duplicate set of car keys.

Loss of equity
If your car is repossessed and sold at auction, all of the equity goes to the lender. A common criticism is that online car title loan companies are over-securing the advance and pocketing the difference.

Renewing the agreement
It can be difficult to repay the debt, and a lot of customers have become trapped in a cycle of dependency. A Missouri auditor discovered that there were 3.5 times as many renewals as there were new cash loans. Further proof that easy cash isn’t always easy to repay.