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When you need cash, often times the need is immediate. Finance corporations sometimes offer an easy way out of financial issues by offering a vehicle title cash advance. Unfortunately, clients are misled by the quick cash that a vehicle title cash advance offers.

Tagged as abusive, vehicle title cash advances charge extremely high interest rates of up to 360%. To receive a vehicle title cash advance, the consumer must sign over their vehicle title as collateral. Set up as open-ended credit, vehicle title cash advances are not subject to an interest rate limit or a maturity date.

So how does one get to have a vehicle title cash advance? It’s simple. A customer enters the finance office to apply for a vehicle title cash advance and is asked how much cash they would like to borrow. With no credit check and no delay, the borrower can obtain a cash advance by exchanging their vehicle title and an extra set of keys to their vehicle as collateral. The cash advances are typically less than £1,000.

The borrower then makes the first payment after 15 days and then every 30 days thereafter. The borrower pays one percent interest per day and must pay a minimum of ten percent of the cash advance principal with each payment, excluding the first payment.

Every vehicle title cash advance has an annual percentage rate of up to 360%. While the vehicle title cash advance can be paid off early with no penalty, the vehicle can be repossessed with one missed payment. Unfortunately, many borrowers are losing their transportation because of this.
This "stable lending" is supposed to be cheaper for borrowers than unstable lending because the lender can look to collateral in the event of default. That security means that it is a kind of lending that is in a vastly different category than payday cash advances – and should not be compared to it.

The vehicle title lenders have avoided interest rate limitations by structuring the debt as open-ended credit, like credit cards. Open-end credit was deregulated because federal law let out-of-state card issuers export their no-cap law. The legislature has never decided that stable, small cash advances should be deregulated.

Most secure title cash advances are charging a much higher interest rate than unstable credit cards. Credit cards are unstable, and therefore more risky than stable cash advances. Despite the greater risk, the current average interest rate charged by credit card corporations is 12.5% . Yet vehicle title cash advances which are stable by vehicles which are owned free and clear by the title cash advance borrowers, are being charged rates that are 29 times the rate being charged on credit cards.

Due to astronomical annual percentage rates and because of the high repossession rate, the first payment on these cash advances is due a scant 15 days after borrowing the cash. Failure to make the first payment of your vehicle title cash advance, or any one payment thereafter results in repossession. While no data is currently available on repossessions of vehicles, at one auction house, over 150 vehicles have been sold after being repossessed.

There is also the loss of equity. For example, for many Iowans their vehicle is their most valuable asset. vehicle title cash advances put this asset at risk and Iowans are losing all of their equity to the astronomical interest rates. For the unfortunate clients who lose their vehicle to repossession any excess equity they may have built is eaten by the repossession costs and interest rate charges.

The "financial emergency" that necessitated the desperate vehicle title cash advance for these consumers is rarely as short-lived as the cash advance terms, so the interest quickly mounts as paying the cash advance off with a balloon payment is usually impossible. It will appear that in a vehicle title cash advance, you won’t be able to escape at all.

Here are some guiding principles from an affordable cash advance term. These should keep you away from vehicle title cash advances as well:

•Establish Fair and Affordable cash advance Terms. Title-stable cash advances should be repayable in affordable installments rather than a lump sum. Is your vehicle title cash advance like this? Rates should be limited, and lenders should be required to think about the borrower’s ability to repay

•Protect Borrowers After a Default. States should bar abusive practices such as seizing vehicles without notice, pocketing the difference between the sales price and what the borrower owes or pursuing the borrower for even more cash after repossessing the vehicle.

•Close Loopholes to Ensure Consistent Regulation. States that permit title lending should close loopholes that exempt some cash advances from the law and ensure that laws apply to all lenders, including those operating across state lines.

•Monitor Lenders Better. States should closely monitor lenders through strong licensing, bonding, reporting and examination requirements.

•Ensure Borrowers Can Exercise Their Rights. vehicle title cash advance borrowers should be able to sue title lenders and void contracts that violate the law. Binding mandatory arbitration clauses that deny borrowers a fair chance to challenge abuses in court should be eradicated.