Fast Money: Are Auto Title Loans a Good Idea?

Fast Money: Are Auto Title Loans a Good Idea?

I’ve been asked about auto title loans lately. Do they make a good source of financing when you need money fast?

There’s a good chance that, at some point, you’ve found yourself in a situation that requires fast cash. I even ended up getting a payday loan once while I was in college. Fast cash sources like payday loans and auto title loans offer a chance for you to bridge a funding gap and get cash fast. But, like all loans, they come with drawbacks and you need to understand downsides as well as the advantage of fast relief.

Advantages of Auto Title Loans

The main advantage to an auto title loan is that you get cash fast, with minimum attention paid to your credit. In fact, if you own your car, the car title allows you to offer up your car as collateral, so your credit might not even be an issue.

If you are looking for fast cash, auto title loans can be one way to get it, and get without some of the other hoops you need to jump through with other sources of fast cash.

But you need to beware: If you aren’t careful, you can get caught in a downward debt spiral that can be difficult to escape.

Watch Out for Auto Title Loans

Before you decide to pull the trigger on a title loan, or a payday loan, or any other type of high-interest fast cash, you need to understand what you’re getting into. Yes, these types of loans can ease your cash flow. However, you will pay a steep price.

The first price is the high interest rate. Almost all of these types of loans come with expensive interest charges. You’ll pay back much more than you borrowed when all is said and done in many instances. There are some states that limit the amount of interest you pay, but it’s still quite high. Even an auto title loan, secured by your vehicle, can be expensive.

Don’t forget that your loan is secured by your car. With auto title loans, you are giving a lender the ability to repossess your car if you default. If that happens, you are stuck without a car and your credit is in further trouble.

Better Ways to Shore Up Your Finances

We all have emergencies and unexpected expenses. After my own brush with a fast money loan, I changed things up a little bit. I began looking for other ways to shore up my finances. I started putting money into an emergency fund so that I would have access liquidity without the need to borrow.

I worked on building up my credit so that I could qualify for a personal line of credit, just in case I needed that kind of access. My personal line of credit isn’t secured with anything, so I don’t have to worry about losing a car or a home if something goes horribly wrong. Plus, my line of credit has a much, much lower interest rate. Most of the time, if I have to tap into it, I can pay it back almost immediately, avoiding interest charges.

Planning ahead can be one of the best ways to combat the need for fast cash. Auto title loans and other similar products will do in an absolute pinch, but once you get them paid off, you want to start changing things up so that you build more manageable finances.

Written by Miranda Marquit

Miranda Marquit is a freelance writer and professional blogger, specializing in personal finance, small business, and investing topics. She writes for a number of financial web sites and blogs, and has been featured in numerous media. Read about life as a freelancer at and in her book Confessions of a Professional Blogger.

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