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May be not so. According to the information from Consumer Federation of America (CFA), more and more consumers today are pushed into high risk loans. Consumers need to be extra careful for “special finance.” Although there are a lot of honest lenders in the market, there are more than enough dishonest lenders in the car loan industry as well.
An example of predatory lending in the auto industry is “Car Title Loans”. Car title lenders may charge car borrowers over three hundred percent annual interest for cash loans secured by a car. The amount of loan is very small relative to the car’s value. But if the borrower fails to pay back the loan in full, lenders can repossess the car overnight by holding a duplicate set of keys.
Frequently, Car Title Loans put borrowers into ugly debt cycle with high interest rate and threat of repossession. Borrower who lends money with Car Title Loans for half the value of a car cost may pay ten times more than a normal auto financing lender.
According to the survey from CFA, over eleven states still permits predatory Car Title lending through legal loopholes. For instance, lenders in Iowa, Kansas, and Virginia claim their loans are open-ended to get around state limits for small loans. Other states like Mississippi and Tennessee allow loans up to $2,500 to be due in 30 days. Lenders in Georgia can keep all the earning from selling a repossessed car.
Predatory lending is very expensive. Therefore, it is important to do a lot of homework, if you are looking into borrowing money.
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