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Car title loans may appear to be a no-brainer, but can be risky

A lot of people in the Little Rock area get into tight financial situations on occasion. The tension can be massive for someone who has never been in such circumstances before.

The guilt that we can heap on ourselves for being late on a payment can be stressful enough. Add on the hounding that may start from credit card companies that insist on immediate payment and the pressure to find debt relief is likely only to grow.

Looking around for something that might be leveraged as an asset might make it attractive to consider getting a loan against your car title. There are companies that will make such loans, but experienced debt relief advocates agree that is exactly the wrong route to take. 

The reason is because such loans fall into the category of convenience loans. They tend to require repayment in a very short time frame, usually a month. They also tend to carry exorbitant interest rates running somewhere in the triple digits. Experts say it's not uncommon for a person who takes out a $1,000 loan from one of these operators to wind up paying three or four times that amount back because of the interest.

That's often an insurmountable price to pay, especially for someone who may be on a fixed income or otherwise strapped for resources. And failure to pay the loan could result in a person losing their car altogether.

The inability to pay a bill doesn't mean they can be ignored. But car title loans are clearly not the ideal solution. Those facing such difficulties would do better to consult an attorney who could try to negotiate a schedule for repayment with a creditor. Alternatively, the attorney could discuss the possible benefits of filing for bankruptcy protection. 

Source: AARP, "Car Title Loans May Wreck Your Finances," Lynnette Khalfani-Cox, Jan. 17, 2014

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