Are car title loans bad?

Should I get a car title loan, or are they just a bad idea? It seems like an easy way to get a loan quickly, especially since my credit isn’t great.

Answer
Great question! Car title loans aren’t necessarily bad, but they are high-risk. While they can be helpful in the short term, they may do more harm than they’re worth in the long run.
Most car title loans have higher interest rates than most loans, sometimes reaching well over 100% interest. The terms will usually force you to repay the loan quickly, meaning you’ll have unreasonably high monthly payments. Plus, title loans use your car as collateral. If you can’t make a payment, your car could be repossessed.
If you’re just looking at a car title loan because of your credit score, consider these your other options:
  • Getting a cosigner can qualify you for more reasonable loans, even if you have bad credit.
  • Credit unions usually offer loans with lower interest rates and more reasonable terms.
  • Your credit card company may also be accommodating if you have a history of punctual, full payments.
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Liz Jenson
Answered on Nov 08, 2021
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