Know the Facts
When you borrow money to buy a car or truck, the lender can take your vehicle back if you miss a payment or in some other way violate the contract. You should also be aware that the lender:
- Can repossess with cause without advance notice;
- Can insist you pay off the entire loan balance in order to get the repossessed vehicle back;
- Can sell the vehicle at auction;
- Might be able to sue you for the difference between the vehicle's auction price and what you owe
- Cannot break into your home or physically threaten someone while taking the vehicle
If you know you're going to be late with a payment, talk to the lender to try to work things out. If you and the lender reach an agreement, be sure you get the agreement in writing. Contact your state or local consumer protection office to find out whether your state gives you any additional rights.
Beware of Car Title Loans
Chances are you have seen or heard an ad for a car title loan to help you make ends meet. In a title loan, a consumer in need of quick cash uses the car title as collateral for a short term loan. No job or postdated checks are required. Sounds simple enough, right? Wrong.
What the title lenders don't say in their ads is that you have to turn over your car title and keys when you get the loan. They'll loan you a small fraction of the car value at sky high interest rates- as much as 25% for one month (300% APR) !!! At the end of the month you are expected to pay the whole amount back, plus the interest.
If you can't pay the loan there are only two options. You could roll the loan over for another month, with more fees and interest. However, as the loan amount increases, it becomes almost impossible to repay the debt. The other option is for the lender to repossess your car. Unfortunately, there is no federal regulation of title loans now, but some states have put some rules in place to regulate the interest charged by these lenders.