Car title loans which were born inside the states of The United States Of America is also referred as pink slips, these loans are unsecured loans where the consumer can get a one-day sanctioned loan on behalf of their ‘lien –free’ car title. Now, what is ‘lien-free’? ‘Lien – free’ cars are the car whose owner right is still with you and a car is not having any ongoing loan against it.
How do they work?
Car title loans are easy and simple, where one who need spot cash takes his vehicle to the inspection office because the loan is given on the basis of the condition of the vehicle. Once the inspection is done, the lender and the client fills up necessary documents which are far nominal than any financial institutions. Once all is well in between them, client leaves with cash and car. It is just like any pawn shop, just a bit different in the end. Therefore one treats own vehicle as an equity.
Boon of Car title loans.
Car title loans are quite famous in the whole of the USA where easy loan during financial difficulties can prove to be a boon. There are few financial institutions where they even offer a competitive rate of interest as per market, and as an add-on, they don’t check the previous history of credit statements. The loans are easy to get just by one’s ‘lien- free’ vehicles. Such loan can be beneficial for the one who doesn’t have time for a long-term process formalities that one face to get the loan sanctioned from Banks and also for the one who might not have a sound financial file to have his loan approved. Just with simple formalities such as the condition of the car, approved government IDs and ‘lien – free’ car papers are enough for the loan.
Bane of Car title loans.
There are particular difficulties that people consider an unsecured loan such as Car title loan has. The easy loan is not so transparent, and in most cases, the rate of interest charged are much higher. Even it can cross the two digit number to three digits per annum. There is a great chance of exploiting the clients on their time of financial emergencies. Surveys conducted often show that people take this loan to support their daily needs and therefore repaying back raise the question of doubt! Therefore not only the consumers but the lenders also get the heat of it. Such short term unsecured loan damages the banking system of an economy. It not only adds the bad loan but also disrupts the regular banking system by driving the clients and the lenders in an unhealthy way.
Ms. Mae, a resident, shares her verdict regarding car title loans on FTC recent announcement on car title loans
“the reason most people pick car loans is because banks want perfect credit when it’s your bank until some financial company come up with some real help for poor people this company and the ones like them will stay around the ftc could help with more help with the credit agency all three of them broke the laws of all states and nothing is being done on the matter how can you pick and choose on who do help you with real money.”
Therefore to neutralize the ill effects of car title loan along with it by increasing the positive effect researchers and policy makers must come forward and make up certain policies where both the parties are specific and transparent and like any other loan it should be structured. Necessary steps must be taken to outweigh the negative aspects by positivity of car title loans.