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Myths vs. Facts about Title Loans

Myth 1: A title loans cause unnecessary debt and bad credit issues.

Fact: Like any loan, if the borrower does not make repay it in time, his credit will suffer. Therefore, title loans should not be singled out for bad credit ratings. Since your car is a prized possession, title loans should be availed only when necessary and if you are sure of paying off the loan within the payment period.

Myth 2: You can avail of a title loan from any lender that you come across.

Fact: All lenders may not work on the same conditions so it is sensible to explore the market and gather information before coming to a decision. Unscrupulous lenders may induce you to borrow without actually being precise about the repercussions of defaulting on your loan, which could spell disaster for you.

Myth 3: A title loans has a low interest rate.

Fact: The rate of interest charged on title loans offered by companies varies depending on their location. Consumers should decide to avail of such loans only after calculating the yearly rate. Most lenders quote monthly rates that appear low and therefore attractive. The annual percentage rate (APR) on interest may range from 36 to as high as 600. Lenders may also charge additional fees.

The most important fact before you opt for a title loan is to consider the risks involved before diving for it. Auto title loans come with high interest rates, which may further escalate in case of rollover payments. You may have to pay an even heavier penalty in the form of your car if you fail to pay.