You have heard me say many times that cash will not correct money problems. Money problems dissipate through consistency and discipline. Most people do not have a budget and those who do, do not usually follow the plan. I have been guilty of not having a budget and not following the plan in the past too. However, I know how to keep stress low in my life; I must have a budget and follow my budget each month. Sometimes, urgent issues arise and it seems that extra money is needed to make ends meet. Some of us have turned to Title Loans to meet short-term needs.
A Title Loan Company caters to low income customers with bad credit and some of these customers are usually unbanked or underbanked. The Title Loan Company will provide a loan for 25%-50% of the value of the car in exchange for the title. The problem is the interest rates for these short-term loans are very high, in some cases 350%, and some interest rates are higher. On average, the customer is paying $25.00 for every $100.00 borrowed. As a result, the customer cannot pay off the loan in 30-days; thus, the loan will be rolled over. This means more interest and fees added to the escalating loan. The average customer will roll over their title loan eight times before being able to pay off the loan.
Let us look at this situation in real numbers. If a customer borrows $1,500 against their car, they will pay $375 in interest. When this bill is rolled over to extend the loan, the interest itself could grow to $3,000 to secure a $1,500 short-term loan. learn more & add comments