There is a form of payday loan, called an auto-title loan, affecting area Ohioans where the consumer commits his or her vehicle’s auto title as collateral. Ohio Attorney General Mike DeWine is urging consumers to carefully consider the terms and conditions for this type of loan before signing up.
In a traditional loan, the lender puts a loan on the title and receives a hard copy to secure the loan. The lien is not released until the loan is repaid. Auto-title loans are short-term loans secured by a consumer’s vehicle title. The vehicle is then repossessed or additional fees are added if the loan is not paid in full on time. So, the consumer faces the risk of losing the vehicle if they don’t pay the loan according to the agreement. The loan may also have higher costs than consumers realize.
BBB recommends the following tips:
- Do your Research — Get the facts. Compare the annual percentage rates (APR) and the total amount repayable (TAR) from the lenders you are considering. Be aware that each time you apply for a loan, there is a note left on your credit score. Lenders can see if you have multiple loan applications when viewing your credit score, which may give the impression you are unreliable.
- Maintain a Good Credit Score — If you are not confident about your credit score, try to build your credit rating before you apply for a loan.
- Get a Fixed Interest Rate Loan — By getting a loan with a fixed interest rate, the lender will not be able to raise the interest rate throughout the life of the loan. If the interest rates goes below your fixed interest rate, consider refinancing as an option to pay a lower interest rate.
- Know Your Budget — Only take out a loan for as much as you need, even if the lender is offering to loan you more money than what you are approved. Analyze your budget and calculate the monthly payments you will be able to afford. Do not take out a loan for more than you can afford. Avoid taking out multiple loans, this can cause pressure to make the payments and rack up a large amount of debt.
- Pay off the Loan Early — Pay off the loan early. By paying in a shorter period of time, you will clear your debt and decrease the amount of interest you will pay over time. Make sure the lender does not charge a fee for an early payment of the loan.
- Carefully Read the Contract — Before signing anything it is crucial to carefully and thoroughly read the document.
Visit bbb.org for more information about banks, lenders and other financial institutions for your loan needs.