Taking out a car title loan is as dangerous to your financial health as meth is to your physical health. There is a reason 30 states in our country do not allow title pawns. The American Centers for Addiction states that meth is one of the most damaging and addicting drugs that a person can take. Similarly, taking out a title pawn loan on your car is extremely dangerous to your financial health.
Compound interest is a great thing when it works in your favor. It has made Warren Buffett one of the richest men in the world. Warren Buffett states, “My wealth has come from a combination of living in America, some lucky genes, and compound interest. “
When compound interest is working against you, it can take away all of your wealth.
How Title Pawns Work
Title loans work like this, let’s say you have a car worth $5,000.00 that is completely paid off. Typically, I see potential clients come in the office with a loan amount of around $1000 on most title pawn loans.
The Georgia Department of Law – Consumer Protection Division states that the interest rate that a title pawn company is allowed to charge is “capped by law at 25 percent monthly (300 percent annually) for the first 3 months and 12.5 percent per month after that (150 percent annually). This means a combined maximum yearly interest rate of 187.5 percent.”
When the balance owed on an auto title loan is not paid, the title of the vehicle transfers to the title pawn company by operation of law. What happens if the car is worth $5,000 and you owe only $1000 but cannot afford to repay the loan? The answer is that you lose the car. Danger, danger, danger!
What Should a person do who is tempted to take out a title pawn loan?
My advice is that you should ask yourself this question. Do I really need ……….? Can I live without the thing that I think I need to save with a title loan?
If things are truly bad financially, the best decision might be to take care of the entire situation with Chapter 13 or Chapter 7 bankruptcy. Consider meeting with a bankruptcy attorney before you take out a title pawn loan.
Why do Bankruptcy Attorneys hate Title Pawn loans so much?
Bankruptcy attorneys hate title pawn loans because of the ruling by the 11th Circuit Court of Appeals in Re Jonathan Northington. The ruling basically states that Chapter 13 does not save a person from a title pawn. Per the ruling in this case, a title loan must be completely paid within 60 days of the case filing. This can be extremely problematic for large loan balances.
However, a title pawn with a low balance can be paid through a Chapter 13 plan. If you are in any kind of sticky debt situation we may be able to help you get out of title pawns. Make sure you take advantage of a free consultation and call us today at 770-881-8449.