Everyone in the world experiences financial instability and uncertainty at some point in time. The only difference is in the severity of the crisis. For some, the monetary issues may be temporary and they may get resolved in a few weeks. For many, the problems continue to fester for months. In rare cases, transient issues turn into long term problems, thereby rendering a person broke and possibly bankrupt. No matter what the actual cause is and why someone is unable to overcome their financial hurdles, everyone needs some assistance. Many people like me turn to car title loans.
As an average working class American, I do not have many assets that can be liquidated. There is no major investment to fall back on. Lines of credit and other financial instruments that are readily available to high net worth individuals are unassailable. Many middle class Americans turn to local title loan places for a myriad of purposes. Many opt for payday loans, especially those who do not have an acceptable credit score and do not own a car either.
Most people who search for title loans near me usually visit a lender in their area. That’s because the rates of interest are usually much lower than those of payday loans. However, the exact purpose why anyone would opt for a title loan will be a crucial factor. I have personally encountered many people at certain title loan locations that are applying for diverse reasons and many of them are actually unsound financial decisions.
Avoid Using Title Loans for the Following Reasons
To Pay for a Vacation
People near me often opt for title loans to borrow several hundred up to a few thousand dollars so they can go on a vacation. Most states allow car owners to borrow as much as 40% of the value of their vehicle. This qualifies millions of people to borrow a thousand to three thousand dollars quite conveniently. There are states that have made it mandatory for lenders to offer equity loans valued at less than 25% of the gross yearly income of the borrower. This does not have much effect on the 40% or up to 50% of the value of the car. Borrowing a few thousand to go on a vacation is simply a bad idea, regardless how prized that holiday is and how long you have been waiting for it.
To Pay an Existing Debt
Most people opt for title loans to repay an existing debt. It could be a credit card debt. It may be one or two mortgage payments that one has missed. It could be any type of loan that one may have taken up in the past and has since failed to repay. Title loans are not exactly suitable for debt consolidation, management or repayment. Regardless of the prevailing rate of interest on your loan that has turned into a bad debt, you would be paying a substantial interest on your loan, which makes it financial unviable to be used to pay off another debt. You may, in the process, get into a more expensive debt. You may lose your car if you fail to repay the loan, which will further add to your agony.
To Buy Electronics
I have seen people use their title loan amounts to shop for electronics. People buy televisions, especially the smart ones. People are buying laptops, expensive smart phones and various other gadgets. Most of these technological wonders are expensive, some costing more than a thousand bucks. None of these electronics will assist you in any productive way or facilitate an increase in your monthly income, unless you are using the gadgets for work. Buying anything that is essentially an expense without any financial return on investment using borrowed money is unwise.
To Buy Gifts
People also buy gifts with borrowed money. This is similar to how people get into credit card debt. Many people do not realize the magnitude of the interests that credit card companies charge on outstanding debts. Transactions are easy. Accounting is difficult and repaying more than what you can is daunting. Don’t purchase gifts and don’t indulge in any discretionary or nonessential purchase using money borrowed as a title loan.
Title Loans Are For Emergencies!
There are many realities when you may have to opt for a title loan and you should, such as if you have a medical emergency in your family, if you have to pay rent or you may be evicted, to pay for the repair of your car or to fix an instrument/equipment that is quintessential to your work. Any expense that is integral to your livelihood, health and work can be attended to with the help of a title loan. Any expense that you can do without should not be indulged in with borrowed money, especially with financial products such as title loans that have much higher rates of interest than mortgages or car loans. One does not have to be frugal all the time but one must be prudent always.