Cash loans with car as collateral will allow borrowers to get money quickly because, essentially, they are promising a lender that if a payment is late, he can keep the vehicle. These are generally last chance loans to pay for an emergency expense. To seek one for any other need would be reckless since the borrower can lose the car and lose credibility. They are sometimes called auto title loans, since the lender holds the title (proof of ownership) until all debts are paid. Obviously, people can only get a cash loan with car as collateral if they own the vehicle free and clear with the legal title in their possession. For immediate cash flow problems, these loans can help. However, it is only a win-win transaction for the lender who profits from steep interest rates, fees, and perhaps a "free" vehicle ---one that can he can repossess and sell to pay off what he is owed if the amount is in default.
This type of lending is a lure for a fast financial fix. Many unsuspecting borrowers are fooled because they choose to trust what is too good to be true. Scam artists thrive in communities where there are young, low-income consumers who think from paycheck to paycheck. A short-range thinker sees cash loans with car as collateral as simple and safe. The Department of Defense has initiated legislation to help protect soldiers and veterans against high-risk loans like these. For instance, lenders can give at a mere fraction of the car's market value with no legal recourse for the borrower. He could be locked into a debt he can't pay with a car he can't sell. This is why a cash loan with car as collateral is high-risk in nearly every case.
If a borrower finds himself putting up his vehicle in order to borrow, the utmost caution should be taken to seek financial counsel from a reputable credit counselor. There are many non-profit financial planners, debt consolidation counselors, and clergy who can help a debt-heavy consumer plan for emergencies and protect assets rather than risk them in a cash loan with car as collateral. Reputable lenders know that a well-educated consumer is less enamored with slick promises that often accompany cash loans with car as collateral. Unfortunately, wise counsel isn't always as popular compared to an easy fix. We do well to remember that wisdom often requires trust and patience. "Shew me thy ways, O LORD; teach me thy paths. Lead me in thy truth, and teach me: for thou art the God of my salvation; on thee do I wait all the day." (Psalm 25:4-5)
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