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Title Loans and Bankruptcy


In some cases, a person who is feeling the weight of substantial debt may consider taking out a title loan in order to obtain some money to pay their financial obligations. However, in many cases, a title loan is just as bad as a payday loan in terms of interest rates and may create a downward spiral of additional debt. Learn how title loans are not always the best answer, and how bankruptcy may help you give you the fresh financial start you need instead.

Title Loans

A title loan is sometimes referred to as a title pawn in some areas. A title loan allows a person who has some amount of equity in their vehicle, to give the title of their vehicle to an entity in exchange for cash. Therefore, the actual title (legal ownership) of the vehicle becomes collateral for the loan. If a debtor can not repay the loan given by the company (along with interest), the company has a legal right to repossess the car and sell it, using the amount obtained in the sale to repay the loan.

Why Title Loans Are Poor Financial Decisions

Title loans are alluring in their promise of fast cash. When someone is facing astronomical debt, the idea of a quick cash infusion can be encouraging. However, the details are where title loans end up financially suffocating those who participate in them. In some cases, the daily interest rates can be 8-10% and yearly interest rates can be as high as 300%! Additionally, compounding can be done on a daily basis. This means that if a company decides to give you a title loan of $2,000, with those types of terms, a debtor will have to pay nearly $500 a month simply to keep afloat. After 12 months, that debtor will have paid nearly $6,000 to the lender for the title loan, and actually still owe the original $2,000, plus more in interest that continues to accumulate. If the debtor finds that they are unable to continue to pay, they will be out all of that money and then there is a good chance that the company will then come and repossess the car for the additional amount owed.

Bankruptcy Can Help

Most people consider taking out a title loan due to the fact that they have unpaid credit cards, medical bills, or other types of consumer debt. While bankruptcy can seem overwhelming, filing for Chapter 7 bankruptcy will allow a debtor to likely discharge (eliminate) most of those debts. In Chapter 13 bankruptcies, a debtor will keep those debts, but create a repayment plan that will allow them to pay those debts off over 3-5 years. Bankruptcy can be the legal tool by which a debtor can receive a financial fresh start in a way that will not drown them in continued compounding interests, like title loans or payday loans.

Let Us Help You Today

If you are considering a title loan or payday loan, consider contacting an experienced West Palm Beach bankruptcy attorney at Kelley Kaplan & Eller at 561-264-6850 for a consultation, and to help you understand how bankruptcy may help you with your financial obligations.





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