How do those CAR TITLE loan places work?

[Anonymous]

For fun.....................I have an 80s car worth  500 bucks. What If I borrowed against it? (If ...if I could...they would probaly laugh)  Then...came back a month later with the 500..........Is it all under a contract?? Hmm.....

[MarineVietVet]

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@Anonymous wrote:

For fun.....................I have an 80s car worth  500 bucks. What If I borrowed against it? (If ...if I could...they would probaly laugh)  Then...came back a month later with the 500..........Is it all under a contract?? Hmm.....

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You can bet it would cost you alot more than just the original $500 to get your title back. 

[MattH]

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@MarineVietVet wrote:

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@Anonymous wrote:

For fun.....................I have an 80s car worth  500 bucks. What If I borrowed against it? (If ...if I could...they would probaly laugh)  Then...came back a month later with the 500..........Is it all under a contract?? Hmm.....

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You can bet it would cost you alot more than just the original $500 to get your title back. 

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Probably so, I've never dealt with these folks but I gather they're bottom feeders.

[Anonymous]

Ah........wondering....

[marty56]

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@Anonymous wrote:

For fun.....................I have an 80s car worth  500 bucks. What If I borrowed against it? (If ...if I could...they would probaly laugh)  Then...came back a month later with the 500..........Is it all under a contract?? Hmm.....

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Think bigger.  Get a fancy rental car and try to get a title loan on it.  Make sure you get the extra insurance for theft when you rent it.

[Anonymous]

They loan you less than the value of the car and charge loan shark rates.

My brother, young and cerebrally challenged, did one of these.  He borrowed $1500 and ended up paying back $3300 in either 12 or 18 months. 

[MattH]

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@Anonymous wrote:

They loan you less than the value of the car and charge loan shark rates.

My brother, young and cerebrally challenged, did one of these.  He borrowed $1500 and ended up paying back $3300 in either 12 or 18 months. 

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Sounds like they are exactly the sort of bottom feeders one would guess them to be, just another flavor of pawnshop.  People with good credit will have other ways to obtain a few hundred dollars when needed so by definition people who use such places will mostly be people who don't have good credit. Anybody who knows a little economics could guess at the result.

[Anonymous]

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MattH wrote:  Sounds like they are exactly the sort of bottom feeders one would guess them to be, just another flavor of pawnshop.  People with good credit will have other ways to obtain a few hundred dollars when needed so by definition people who use such places will mostly be people who don't have good credit. Anybody who knows a little economics could guess at the result.

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I'm not disagreeing that the car title loan places are bottom feeders who prey on folks with poor credit and limited assets.  But "just another flavor of pawnshop" is far from accurate.  It's an unfair characterization of pawnshops and people who occassionally use them for short term cash flow solutions. 

I know several extremely high net worth individuals who use the services of a pawnshop from time to time, and they each know more than a little economics.  They also have enviable credit.  While they won't pay 10% a month on a pawn loan, they may pay a negotiated 4% or 5% per month, sometimes even less depending on the amount of the loan versus the value of the item pledged as security.  A bigger spread between the item's value and the amount of the loan means a lower rate for the loan, and in a term of a month or less, that rate can significantly beat taking a cash advance on a credit card.

There are many reasons people like these use pawnshops, too.  Access to cash can depend on how an individual structures his finances, such as using trusts or having business managers.   And high net worth individuals also don't leave their money laying around, it's always working, so if cash is needed, timing can be an issue.  

Just pointing out that pawnshops don't necessarily come straight out of "The Lost Weekend".  They're the oldest and the most democratic of lenders, and just as in any other form of lending, the usefulness and fairness of a pawnshop loan is highly subjective.

[marty56]

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@Anonymous wrote:

Just pointing out that pawnshops don't necessarily come straight out of "The Lost Weekend".  They're the oldest and the most democratic of lenders, and just as in any other form of lending, the usefulness and fairness of a pawnshop loan is highly subjective.

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+1

I also think its unfair to put pawn shops in the same boat as payday lenders.  Check out the show Pawn Stars,

[Jazzzy]

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@Anonymous wrote:

For fun.....................I have an 80s car worth  500 bucks. What If I borrowed against it? (If ...if I could...they would probaly laugh)  Then...came back a month later with the 500..........Is it all under a contract?? Hmm.....

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Not only is it under a contract...your FICO could likely be penalized for this type of loan reporting on your credit report.