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Should An Auto Title Loan Be Used To Payoff Unsecured Debt?

If you are thinking loan using an auto title loan to pay off a credit card, you may just be looking at more financial problems in the near future. Yes, it is an option, but turning unsecured debt into secure debt is not always the best choice for many debtors.

For starters, compare the interest rates for the credit card and the title loan. Most often the auto title loan will carry a higher rate. If you happen to have an account with a credit card company which has increased your interest to an amount higher than average, you will then need to stop and think about payments.

Credit cards are revolving accounts. The monthly payment is based on the current balance. A percentage of the amount owed is calculated as the minimum amount due. A debtor will always have the option of paying more each month. Most of the minimum payment will be used towards interest fees for the month, so any time you can pay extra; it will be applied to lower the principle. It makes good sense to pay more than the minimum to keep the original cost of the purchase down.

Treating an auto title loan payment as you would a credit card would cause significant problems for your Title Loans finances. The interest payments are high causing the debtor to pay see a sharp rise in the balance when the loan is not paid off on the original due date. Since these short-term loans are secured by your pink slip, missing payments are much more than a negative mark on your credit. Defaulting on an auto title loan will get your vehicle repossessed. This avenue will only lead you to more problems, financially and personally.