One thing you should not generally do is take out a loan against the title of your paid for car from title loan companies. Maybe your local friendly bank could work, but title loan companies are a major rip-off. For example, I have an Iowa bankruptcy client who had borrowed $712 against a lien-free vehicle worth $2,000. It was a one year loan. The interest rate was 301.93%. That is not a typographical error--the 0 was there! In the course of the year she would have paid $1,593.79 plus the $712. In other words, her total payback was to be $2,305.79. Moreover, reading the contract closely I saw that in fact she only received $600 cash because $10 went to pay for the lien and she had been convinced that she should join the Continental Car Club which cost $102. The monthly payment was $192.15 for a year to borrow only $600.
Apparently she was doing fine for about 9 months and then she missed a payment. The contract said 10 days late and she was in default. The result was the Illinois based title loan company called her and said if she could not come up with the cash that day it was going to send someone to repossess her car. Of course it was her only car which she desperately depended on. She is a single full-time working mom with three kids. Unfortunately, she could not get the demanded amount and within the day the car was taken. It was a nightmare for her...
The car went and she never received any information about what happened to it. It seemed that she only owed $800 at most including interest for the remainder of the loan period. But the companies typically claim costs for collection, repossession, sale preparation, auction and other charges--some of which are flat out junk--so according to them no equity remains. She received nothing--not even an explanation.
The moral of the story is stay away from title loan companies. They are not only profit oriented, but rip-off oriented right from the beginning until you lose your car and all the equity you had in it
Iowa Bankruptcy Attorney Robert Liptak
Fairfield, Iowa
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