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Bankruptcy May Be Your Option

Title loans causing more financial challenges than debt relief

You can't turn on your television without seeing the ads: "Quick money for your car title, but you keep your car." The quick money is offered for everything from emergency medical bills to holiday shopping. And it is so easy.  As long as you own your car, show us your title, and we'll cut you a check.

But the fine print can be your downfall. Even if you take the time to read it, chances are you won't understand it. So how do you know what your rights are under the agreement and, maybe more importantly, what are the lender’s rights?

The quick answer is: You have very limited, yet very costly, rights; namely, immediate cash at high-interest rates that, if you cannot pay, may also result in the repossession of your vehicle.

The lender, on the other hand, holds all the cards: title to your car, a king's ransom of interest for the fast cash and the right to own your vehicle if you fail to satisfy your obligation.

Some are considering the title loan business as the latest subprime lending debacle. Just as many homeowners lost their homes when they were granted a mortgage or equity line that they couldn't afford, lenders are giving out auto loans to buyers who can't pay.

Title loan companies are happy to hold the title for "emergency" cash regardless of the emergency or the customer's poor credit rating.

The reason is obvious: a recent study of title loans done by a major newspaper showed that some of these loans carry an effective interest rate of over 500 percent. And one study showed that one in every six borrowers using their vehicle title as collateral will eventually have it repossessed.

The promise of immediate gratification in the form of a quick cash loan, with seemingly nothing to lose in the deal, can seem like a no-lose situation. But if your budget is strained to the point that you are considering such an arrangement, perhaps there are better options for debt relief.

An Oklahoma bankruptcy attorney who helps clients with their financial challenges may be  able to help you find a long-term option that will ultimately yield better results and, just as the title loan companies promise, help you keep your vehicle.

Source: New York Times, "Rise in Loans Linked to Cars Is Hurting Poor," Jessica Silver-Greenberg and Michael Corkery, Dec. 25, 2014

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