People in financial straits often do not know where to turn to solve their problems and, as a result, act out of desperation and make poor choices. I have written on this site of one example, the “pay day loan,” but there are many others, including the “car title loan.” The problem with this type of loan is the same as the “pay day loan”: exorbitant interest.

A client of mine told me that he had gone to one of these places to borrow $2,500 on a “title loan.” They wanted interest of 1% (or $25) per day!! This is not unusual, unfortunately. One company gives an up front example of how much a loan would cost if you borrowed $1,000 and paid it back over twelve (12) months. After paying $146.76 per month, it would be paid, but you would have forked over an additional $761.12 in interest! That’s a rate of over 75% per annum! In New Jersey, it is considered criminal usury to charge more than 30% interest to an individual or more than 50% to a business entity!

At least that company was up front about its rates. Another company skirts around their rates on their FAQ page. However, when one of the FAQs asks if the transaction rates are considered high, the response is, “Not if you consider that title lenders do not base their decision on credit.” The clear message is that they are marketing to those with bad credit, figuring they are the ones desperate enough to pay that high a rate.

Don’t fall for it! Lots of legitimate banks will make a secured loan to you with your car as collateral. Even if your credit rating isn’t all that good, you will not pay rates approaching anywhere near 700%. If you are going to consider this, proceed with caution and ask lots of questions about the interest rate. Be sure that they give you the rate expressed as an APR (Annual Percentage Rate). Also, be sure only to deal with a company in New Jersey, so that they will be subject to our usury laws to keep the rates reasonable. You may end up paying 29%, but it is better than 75%!

The Law Office of Steven J. Richardson serves New Jersey, including:  Gloucester, Camden, Burlington, Salem, Cumberland and Atlantic Counties and surrounding New Jersey communities, including Woodbury, Colonial Manor, North Woodbury, Woodbury Heights, Deptford, Thorofare, Gloucester City, Washington Township, Blackwood, Brooklawn, Westville and Pitman.

Richardson Law Offices
40 Newton Avenue
Woodbury, NJ 08096
Phone: (856) 686-9910
Fax: (856) 686-9911