Why You Should Never Pawn your Car Title

Money's tight and you stress yourself trying to find a way to get over the hump between paydays. If you own your vehicle, then a car loan seems like an ideal solution to help you pay off extra bills and get ahead. The problem is, this may cost you more money in the long run or result in loss of your vehicle. Many consumers dive head first into these types of loans without fully understanding the ramifications. This is the exact reaction that title pawn owners want from you.

Interest Rates

Anyone who is familiar with the lending field knows that in order to make money, lenders must charge an interest rate on the loan amount. Banks, for example, may charge anywhere from 9% t0 15% APR on unsecured and secured loans. Title pawn owners put this same practice in your loan contracts with only one difference. Many will charge up to 100% interest. This means your monthly payments may be 95% interest and 5% principle. Here's a prime example from my own experience with title pawn. My monthly payment was $220. When scrutinizing my receipts I noticed a problem. The way it was broken down, in small print mind you, was $209 to interest and only $11 towards the principal loan. Upon reviewing my original contract, again small print, I realized the interest was astronomically high. No wonder it would take two years to pay my vehicle out of pawn.

Repossession

Again, when dealing with title pawn, you must face the fact that any default on payment will result in vehicle repossession. Many title pawn owners will offer you thirty days to resume ownership by paying off your loan in full. This sounds good right? More like a second chance? WRONG. What they don't tell you is that you have thirty days from the date you went into default. Many companies wait...you guessed it... thirty days to repossess your car when you enter default. This means once they have your car on their lot, they can sell it the same day. Many people have walked into title pawns expecting to pay out their repossessed car the day after it was picked up and finding it is gone. Sold to the highest bidder. Again, read the fine print and ask questions.

Selling Prices

So you received a loan for $800 on your vehicle and you defaulted. They pick up your car and sell it the same day. Do you really know what they sold it for? Many title pawns will give you false Kelly Blue Book value rates to make you think they are only trying to help you out. The problem is, they are actually trying to save money, which one must admit is good business sense; however, very deceptive. Always know the value of your vehicle. Once your car is repossessed over default payment, they will jack up the price by another $800 to $1000 and make a pretty penny above what they would have gotten from you with high interest rates if you were to pay it out immedeately. Some companies will even go so far as to claim they did not make enough to cover the loan and charge you the "balance" owed when in fact there is none.

During Repossession

Another sad fact about title pawns and repossessions, is that when they come to repossess your vehicle they will not always allow you to remove your personal effects. Some title pawn businesses will simply pick up the vehicle and charge you $50 to come to them and get your belongings. Just another way to rob you blind over something that was already yours to begin with. In 2009, a friend of mine had a repossession, although she was caught up on payments. She tried to fight it and also had the headache of fighting for her son's prescriptions that were left in the sun visor for the day's errands. Her son was on life-saving medication. She was charged $50 to pick up her things and the prescriptions although she had explained the money she had was for the medications. The title pawn employee simply stated "Thats not our problem. If your a good mother you will pay the fee." How heartless can one person be? When she got to the title pawn to retrieve her belongings, the prescriptions were not there, but she was made to sign a paper beforehand stating she received everything before she was allowed to even look at it. The title pawn employee who cleaned out her vehicle claimed there were no prescriptions in the vehicle. What followed was a police investigation on the title pawn, that resulted in a "We don't wanna handle this" because it involved two different states. Wow, what a nightmare!

Before you consider title pawn as a valid means of income, ponder it carefully. While there are some up-front, honest businesses out there, there are also some dirty, low-down crooks; many of which work in big-name title pawn companies. In my honest opinion, its always best to work with your utility companies and whoever you owe money to rather than to take out a title loan. Many people will work with you and allow you to make a late payment if you simply call and explain your financial situation. If all else fails, opt for a small, unsecured bank loan with low interest rates that fits easily into your budget.