A title pawn loan is a short-term, very high rate loan that utilizes a borrower's vehicle title as collateral. Title pawn lenders sometimes market to the lower income communities and army bases with the lure of easy and fast money. In truth though, consumers typically don't understand the full and final cost of the loan which is many times hidden in a agreement with confusing financial jargon. When the consumer can't keep up the monthly payments on the loan typically in the business, the title pawn lenders will repossess the borrowers' vehicle, which quite often is the consumersr only transportation to their job, the grocery store and doctors' offices. Lawmakers in several states have began to recognize the debt trap that title pawn companies set with these high interest loans. Some states have made title pawn loans illegal altogether. Some states cap the Annual Percentage Rate on loans. Currently Georgia law allows title pawn lenders to charge as high as 300 percent on a small title loan. This extremely high limit locks the consumer into a very difficult debt and makes it really tough for many of Georgia's families to get titles to their vehicles back from the lenders. Other title pawn lenders, which are regulated by the state's Industrial Loan Act, operate under a 60 percent Annual Percentage Rate cap. Requiring the same of all title lenders would level the playing field for all of the title loan companies, and help give borrowers a better shot at paying down their loan. Currently, many of the title pawn loans are created as a 30-day balloon loan. If the consumers are unable to make their monthly payment, they either lose their car or are forced to extend the life of the loan – by adding on another month of interest. A borrower can lose a vehicle worth $8,000 simply for defaulting on a $2000 loan. Even if the title pawn lender sells the vehicle and makes a profit - over and beyond what the borrower owed - the borrower receives nothing. All states should require that the lenders return the difference, or a portion of the difference back to the borrower after the vehicle has been sold to settle the debt. Borrowers have nowhere to turn if they feel they have been victimized by a title pawn lender. By licensing these lenders and providing regular governmental oversight, States could set and enforce guidelines to help guarantee fair lending environments for struggling borrowers. Fairness to both the consumer and the title pawn lending industry should be a top priority for all the states when setting and regulating laws and guidelines for the practice. The industry is a fair and viable business for entrepreneurs, and a great service for many struggling families that need a quick short term loan.
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Title Pawn has the good the bad and the ugly. But our states have a few good options that would make the pracice more fair to the consumer, and help the industry survive.
Brent Thomason manages a small title Pawn company, and continually works to maintain a level playing field within the industry. Title Pawn
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