In a time of financial crisis, it’s easy to see how people might resort to title loans for quick cash. They’re usually available without credit checks, and people can typically get the money quickly. But those who take out the loans can find themselves in a cycle of debt and potentially lose their cars. Read

Unlike other types of bad credit loans, you don’t need a strong income to qualify for a title loan because it is based on the value of your car. However, to get the loan, you must hand over your vehicle’s title, which proves legal ownership, to the lender in exchange for a lump sum payment. If you fail to repay the loan on time, the lender can repossess and sell your vehicle. Graciela Aponte-Diaz, director of federal campaigns at the Center for Responsible Lending, says that’s not an uncommon occurrence: 20 percent of title loan borrowers have their cars repossessed.

Drive Forward with Confidence: Title Loans Demystified

Those who get title loans also often have limited options for repayment because they don’t always use their savings to cover expenses. And if the payments aren’t made on time, the borrower can end up in a debt cycle where they keep rolling the loan over and pay more interest each month. Alternatives to a title loan include personal loans, payday loans, cash advances on credit cards and borrowing from friends or family. Those who need fast access to money should consider these other options first.

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