No matter what, falling behind on an installment loan payment is bad. The moment you become delinquent on your loans, you will start racking up extra charges, additional fees and this is just the start of your financial ruin. If this continues for a long time, your activities will be reported to a collection agency and you’ll start getting harassing phone calls and even a lawsuit. Moreover, you better don’t forget that your credit score will also take a toll when you fall back on your payments.
How can an auto title loan help?
An auto title loan is that type of loan which you secure against the title of your car. Typically, you obtain few dollars from the lender and you agree to repay it, including the fees and interest rate within maximum one month. Nevertheless, title loans have earned the name of pink-slip loans as they’re risky for few reasons. The interest rates on title loans are 300% and since you’re just given few weeks to pay back the entire amount, the borrowers get trapped in the vicious cycle of debt, not being able to handle the combination of short term and high rate.
Auto title loans are short term loans
As mentioned earlier, auto title loans are nothing but short term loans which have to be repaid within a month. This clearly indicates that you have come up with funds quickly for repaying the entire amount and this is pretty tough. Although there are cases when you can roll over the loan instead of repaying it, yet rolling over is considered as a predatory option.
Rolling over the loan amount is a costly way of borrowing because you will be charged new loan fees and rates. In fact, the states also limit the permission of rolling over the loan amount.
Can you lose your car if you miss payments?
One of the main issues with taking out auto title loans is that you run the risk of losing your car. When you’re not able to maintain payments on your auto title loan, the lender can repossess your car; sell it off only to recuperate the money that you owe him.
If the lender actually seizes your car, you may find it difficult to get to work and keep earning your living. It gets even more difficult for you to complete different tasks like going to school and shopping. So, if you don’t think you can live without your car, don’t take the risk of taking out auto title loans.
Worthy alternatives to title loan
Experts suggest that before you take out an auto title loan, you should ensure trying out everything else. Here are few options to check out:
- A personal loan
- Your credit cards
- Curb costs
- Extra passive source of income
Hence, it is not that you shouldn’t opt for auto title lending in Houston against your car but once you do so, you have to ensure being able to repay the loan on time to avoid falling in debt.