What is the interest rate on a car title loan?

I need to take out a small loan to cover some home repair costs, but I have bad credit, and the loan offer from the bank has a higher interest rate than I expected. A friend of mine said a car title loan might be a better option because they don’t look at your credit, but what is the interest rate on a title loan?

Answer
Getting a loan through a bank with a poor credit score can be extremely challenging and frustrating. Unfortunately, car title loans can have interest rates of up to 25% or more a month, typically higher than banks offer. Add to that, repaying the loan does not help build your credit.
While you can use the interest rate to compare loan offers, they can be misleading. Loan providers will often cite their low-interest rates and exclude the fact that they have incredibly high lender fees that can take you by surprise. To more accurately compare loan offers, look at the annual percentage rate (APR), which includes lender fees and is a better representation of how much you’d have to pay back after one year.
Car title loans can easily have an APR of 300%, put you at risk of having your vehicle repossessed, and do not help build your credit score, so taking out a personal loan from your bank may be a better option. To ensure you are getting the best deal, you should compare offers from multiple lenders before signing an agreement.
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Jack Walsh
Answered on Nov 09, 2021
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