Cash for Your Car Title is Not Smart: Beware of Storefront Lending Companies

Think that credit card companies are bad about charging outrageous interest fees? The really bad culprits are the storefront lending companies. These companies thrive because consumers who are not credit worthy or are desperate to get money to pay every day bills such as utilities or the rent borrow money.

Especially now when so many people are on unemployment and banks wouldn't even consider lending to someone without a job. Where else would you get money if you needed it? The problem with these companies is that their interest rates can be over 300%.

People who get into trouble financially or don't have any type of credit history can fall into this trap. Thinking it's a quick way to get some money to pay off a debt. You don't even have to leave your house to get one of these loans. If you have a computer and internet service you can apply right online. Let's say you want to borrow $625 the end result if you decide to get this loan over a 20 week period would be a 455% interest rate. You would have to pay back $2,459 in order to borrow that money.

Sometimes people might be tempted thinking that they will pay back the money before it comes due the first time. Say you wanted to keep the money for just 2 weeks. In order to pay it off in full you would have to pay back the original loan amount plus another $17.50 per $100 a day. So if you borrowed $700 you would have to pay that amount plus another $122. This isn't counting any upfront fees that are charged to process the loan. If you were so desperate for the first $700 do you think in two weeks you would be able to pay back $822? More than likely it wouldn't be possible. On this type of loan you do need to be employed and the money is automatically placed into your bank checking account once your application has been approved. It's also a scary thought that you would give them access to your checking account.

There are also other types of loans such as vehicle title loans. In this type of loan you would use the equity in your vehicle to borrow against. This also is a high interest rate loan. In this type of a loan, if you own your vehicle and have the title, you can borrow money. You hand the title over to the lending company but still are able to use the car. You are charged fees for processing the loan and they may tack on fees even for things like roadside assistance. These fees can be a hundred dollars or more even for loans under a thousand dollars. So right away the borrower is on the wrong end of the deal. Not only do you pay fees, but then you pay interest rates in excess of 200%. Yikes. Don't default on the loan because they will repossess your vehicle and then you will still owe money and not have your car.

Some alternatives to using one of these types of lenders is to talk with your employer about a cash advance or if you have a credit card that you can take a cash advance on, that would be preferable to using a storefront lending company. There are other ways. They just may not be as convenient as these companies seem to be.

Need to borrow some money? Borrow any place else or ask family or friends, but don't get trapped into something that will cost you a ridiculous amount of money that you don't have.

Source:

http://www.paydayone.com/faq.aspxhttp://www.cnn.com/2008/LIVING/wayoflife/10/08/aa.car.title.loans/index.html