Are you down on your financial luck and need a boost? Do you find yourself browsing the internet for a fast, “easy” loan to cover your bills? You may feel tempted to take out a title loan to tide you over – but beware!
On the surface, title loans seem like a harmless way to put cash in your pocket. But the reality is far darker. Find out the truth about title loans here, as well as how to avoid them – and where to go for non-predatory alternatives.
How do title loans work?
First: what is a title loan?
By definition, a title loan is an arrangement where you borrow money by putting up something valuable as collateral. Companies that offer these loans would have you believe they are quick, safe infusions of cash. But the truth about title loans is hidden in the details: the fine print.
Use your car as collateral
The most common type of title loan requires you to put up your car title as collateral. As such, you must own your car – or have equity in your vehicle – to qualify a loan. If you’re eligible, this type of secure loan can net you up to 50% of the vehicle’s value.
But it’s important to note that most title loan payments are due within 2-4 weeks of signing up. Such a short loan period can make it difficult to pay your debt. Furthermore, if you were to experience a medical emergency or other unexpected bills, you may not be able to pay your loan in full.
Triple-digit APR and extra fees
The truth about title loans is that they often prey on people with poor credit or economic status. Because you’re securing your debt against your vehicle, many lenders don’t run credit checks.
Unfortunately, title loan lenders also charge sky-high interest, sometimes as high as 25%. Over the course of a year, this translates into a triple-digit APR – up to 400% or more! And interest rates don’t account for late fees, partial payment fees, and other costs that lenders tack on if you can’t pay your balance.
Risk repossession of your car
If you fail to make your title loan payments on time, the lender may roll your loan into a new one. In such cases, companies often “allow” you to make interest-only payments on a month-by-month basis.
While this vicious cycle keeps your loan active, you pay a lot more money in the long-term, which can make it difficult to pay your debt. And eventually, the title lender has the right to repossess your car to cover their losses. To get it back, you’ll be on the hook for tons of extra fees – on top of your existing debt.
Other borrowing options
Now that we’ve covered what a title loan is, we can look at other borrowing options. While the following alternatives may not be right for everyone, they may be better than taking out an expensive title loan. (Better yet, some can even help you build your credit, too!)
0% APR cash advance
If you need cash today, you can apply for a no-interest advance of up to $250 with InstacashSM. An Instacash advance is free to access with your MoneyLion subscription, comes with no monthly fee, and can process in mere minutes once you qualify. And best of all, there’s no credit check!
Credit Builder Loan
If you’re looking for an arrangement that involves no cosigner, and no hard credit checks1, a MoneyLion Credit Builder loan may be right for you! With a Credit Builder Plus membership, you can build your credit for only $19.99 per month. In addition to qualifying for up to $1,000 in same-day cash funding while earning interest on reserves, you can:
Monitor your credit score in the MoneyLion app
Take advantage of 0% APR Instacash advances
Enjoy exclusive monthly Lion’s Share Loyalty Program rewards2
Build your credit with monthly credit reporting3
Early payday
If you want to enjoy early payday without taking out a predatory loan, a RoarMoneySM banking account may be just what you’re looking for. With RoarMoney, you can get your paycheck up to two days early when you sync your direct deposit.4 Plus, you’ll receive a contactless MoneyLion Debit Mastercard®, cashback rewards5, and robust security features – all for $1 per month!
Credit union payday loans
A payday alternative loan, or PAL, is a lending option offered by some federal credit unions. With a PAL, you can borrow between $200 and $1,000 at a maximum APR of 28% (plus up to $20 in processing fees). While these loans offer higher interest rates than some borrowing options, they may still be cheaper than making title loan payments.
Find part-time work
If you have some time until your bills are due and prefer to earn your cash, you might look into side hustles, part-time employment, or one-off gigs. Whether you want a long-term position to finance a new car or a short-term arrangement to pay off an existing loan, you can find opportunities to suit your needs!
And if you’re not sure where to look, you can start by:
Browsing job hunting sites such as Indeed
Checking out the freelance scene at Upwork
Research how to start your own business from your living room
General relief offices
Sometimes, we need a little help to get through rough patches in life. If you’re down on your luck, local or federal assistance programs may be able to help. Some nonprofits also offer emergency cash or services for qualified candidates. Depending on the organization, you can use these funds for food, childcare, or even job placement assistance.
Co-signer loan
Typically, banks and credit unions don’t like to hand out unsecured loans to borrowers who can’t prove they can pay. Thus, if you have a low (or no) credit score, an unsecured personal loan may seem out of reach.
But adding a responsible co-signer can help. By getting a parent or friend to guarantee your loan, you not only boost your chances of approval, you might get a lower interest rate, too!
Final thoughts about title loans
Title loans are typically loans that take advantage of low-credit, low-income individuals. Instead of entrusting your trusty car title to an untrustworthy lender, shop around for lower-interest – or no-interest – options with your best interest in mind.
And if you’re ready to make the leap, you can take advantage of the MoneyLion rewards cashback program to put some extra cash in your investment account.
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Disclosures
Instacash® is an optional service offered by MoneyLion. Your available Instacash Advance limit will be displayed to you in the MoneyLion mobile app and may change from time to time. Your limit will be based on your direct deposits, account transaction history, and other factors, as determined by MoneyLion. Expedited delivery requires Turbo Fee. See Instacash Terms and Conditions for more information and eligibility requirements.
Credit Builder Plus membership ($19.99/mo) unlocks eligibility for Credit Builder Plus loans and other exclusive services. This optional offer is not a Pathward product or service. A soft credit pull will be conducted which has no impact to your credit score. Credit Builder Plus loans have an annual percentage rate (APR) ranging from 5.99% APR to 29.99% APR, are made by either exempt or state-licensed subsidiaries of MoneyLion Inc., and require a loan payment in addition to the membership payment. The Credit Builder Plus loan may, at lender’s discretion, require a portion of the loan proceeds to be deposited into a reserve account maintained by ML Wealth LLC and held by Drivewealth LLC, member SIPC and FINRA. The funds in this account will be placed into money market and/or cash sweep vehicles, and may generate interest at prevailing market rates. You will not be able to access the portion of your loan proceeds held in the credit reserve account until you have paid off your loan. If you default on your loan, your credit reserve account may be liquidated by the lender to partially or fully satisfy your outstanding indebtedness. May not be available in all states. Credit Reserve Accounts Are Not FDIC Insured • No Bank Guarantee • Investments May Lose Value. For important information and disclaimers relating to the MoneyLion Credit Reserve Account, see Investment Account FAQs and FORM ADV.
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When you apply for CreditBuilder Plus, we will perform a soft credit pull to review certain financial information. This soft inquiry has no impact to your credit score and may or may not be recorded in your credit reports depending on the bureau. This is unlike a hard credit pull which affects your credit score and can appear on your credit report for two (2) years.
Lion’s Share℠ Loyalty Program and monthly payment are subject to terms and conditions, see here.
Credit score improvement is not guaranteed. Credit scores are independently determined by credit bureaus, and on-time payment history is only one of many factors that such bureaus consider. Your credit score may be negatively impacted by other financial decisions you make, or by activities or services you engage in with other financial services organizations. MoneyLion is not a Credit Services Organization.
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