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Vehicle Title Loans Are An Indicator Of Financial Problems

Although certain sectors of the economy may be showing some signs of strength, many Americans continue to struggle financially. A variety of loans are available to help pay bills during lean times, but many are exorbitant and predatory. According to AARP, more and more people between the ages of 45 and 64 are seeking vehicle title loans to help meet short-term financial needs.

What is a vehicle title loan?

Although some lenders are willing to lend money without requiring collateral, many require more than just a borrower's promise to repay the loan. When a borrower pledges the title to his or her vehicle as collateral for the loan, it's referred to as a "title loan." If the borrower fails to make payments to the lender pursuant to the loan's terms, the lender can foreclose on its lien by repossessing the vehicle, selling it at auction, applying the proceeds received at auction to the balance, and if the proceeds were insufficient to satisfy the loan's balance in full, pursuing the borrower for a monetary judgment.

Why are vehicle title loans dangerous?

Lenders know that borrowers seeking vehicle title loans are often desperate for cash. Accordingly, vehicle title loans are usually at interest rates that are extremely high. Consequently, the rate of default on such loans is also high. Financial experts interviewed by AARP note that those who take out vehicle title loans often enter a downward spiral of debt.

Can bankruptcy help those with vehicle title loans?

Yes. If you've already lost a vehicle to repossession by a lender, a Chapter 7 bankruptcy petition allows you to discharge any remaining monetary obligation to the lender. And if you still own a vehicle subject to a vehicle title loan, Chapter 13 bankruptcy permits a borrower to lower the interest rate on the loan to a much more reasonable rate than is likely provided for in the loan agreement.

An experienced bankruptcy law attorney can help you determine whether bankruptcy is the right financial tool for you.

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