What’s the true cost of a car title loan?

Have you seen a sign offering a car title loan — also known as a pink-slip loan, title pledge or title pawn? These loans use your paid-off car as collateral, and you get a small, short-term loan with a high interest rate. You usually have to repay the loan in 15 or 30 days, and the annual percentage rate (APR) is often more than 100%. If you don’t pay back the loan, the company can repossess your car — and then you’re worse off than you were before. It’s a very expensive way to get money.

The FTC recently announced consent agreements with two car title loan companies that, according to the FTC, didn’t give consumers the information they needed to make an informed decision. Fast Cash Title Pawn, LLC and First American Title Lending, LLC both advertised a finance charge rate — specifically a 30-day introductory interest rate of 0%. What they didn’t say was the 0% rate only applied if the borrower met specific terms to qualify. Neither company mentioned what finance charges might appear after the 30-day introductory period expired. Because of these practices, people who might want to consider a car title loan couldn’t figure out the true cost, or comparison shop among different ways to borrow money  .

Before you decide to take out a car title loan, weigh some options.

  • Can you get a small loan from your bank, credit union or a small loan company? Even a cash advance on a credit card might cost less than a car title loan.
  • Shop for the offer with the lowest cost. Compare the APR and the finance charges, and borrow only what you can repay in time.

Over the longer term, consider making a budget that helps you avoid costly loans like car title loans. You can contact a local, non-profit consumer credit counseling service if you need help working out a debt repayment plan with creditors or developing a budget. These groups offer credit guidance to consumers in every state for no or low cost.


Tagged with: car, debt, interest, loan, poor credit
Blog Topics: 
Money & Credit


Aren't these car-title loans outlawed in most states?
I know they exist (unfortunately) in VA.

the reason most people pick car loans,is because banks want perfect credit,when its your bank.until some finaceal company come up with some real help,for poor people,this company and the ones like them,will stay around,the ftc could help with more help with te credit agency,all three of them,broke the laws of all states and nothing is being done on the matter.how can you pick and choose on who do help you with real money.

Banks aren't in the business of charity. Americans are addicted to debt. Stop buying things you can't afford with money you don't have.

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