High interest car title loans are the new scourge in lending. What many state attorneys general have deemed veiled loan sharking, these loans often trap vulnerable borrowers into high-interest, high-fee loans that customers have little hope of repaying. Similar to payday lenders, these operations feed on a struggling consumer base. To relieve yourself of a high-interest title loan, you must execute several strategies.
If you have disposable income left over at the end of the month, you're already well on your way to gaining relief from a car title loan. The first step is to set up a strict budget and exercise financial discipline. To begin, spend as you normally would for two weeks, but write down every single expense. Then, at the end of those two weeks, review your purchases and begin trimming your miscellaneous budget—coffee and other small daily purchases—and your entertainment budget. Set up a fund that will be used exclusively to pay down the principal of the loan. This will only work if you religiously stick to your budget.
If you feel you've been misled or lied to about your loan, contact your state attorney general. Since the process may take a long time, you may need to contact a lawyer to handle a lawsuit. If you cannot afford an attorney, you can attempt to secure representation from your local American Civil Liberties Union office or a consumer advocacy law firm.
Managing a Loan
Keeping a loan up to date and in repayment is in the best interest of both the lender and the borrower. Contact your title loan lender and attempt to secure a "hardship" plan. A restructuring is normally temporary and will not give you full relief from payments, but it may help you catch up and pay down more of the loan in the hardship period.
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Seek refinancing options. Check your credit report (see Resources for a free copy) to make sure your scores will qualify you for a lower rate loan. Normally, any score above 660 will give you better options. Speak with your local bank or credit union about personal loans. You'll most likely be unable to secure another car loan, but a lower-interest personal loan from a reputable bank or finance company will decrease your payments.
Be careful when seeking refinancing options. Sometimes desperate borrowers go from one bad situation to another. Speak with a trusted adviser—friend, family member, accountant, financial adviser—before signing new loan paperwork.