Title Loans Houston, which provides car title loans to residents in Texas, explains how interest is calculated on title loans. According to the lender, this is one area that most confuses borrowers, and it may lead some to borrow more than they can afford to repay.
The lender also points out that many are surprised to learn that these loans offer rates that are comparable to credit card rates, which may be surprising considering the reputation these short-term, bad credit loans have obtained.
Most car title lenders in Texas offer pre-calculated interest rates, which are determined based on the resale value of the car. This interest is simple interest, which is a percentage of the principal amount, unlike compound interest, which is interest not only on the original balance but also on interest previously earned. The lender does point out that this interest rate may change if the loan is refinanced for a larger amount.
Title Loans Houston recommends using a simple online interest calculator to look at the total cost of the loan, which requires only the principal amount (the amount borrowed) the interest rate and the length of the loan. The faster the loan is paid back, the lower the total cost in most cases.
In Houston, car title loans often have interest rates that are up to half the APR of payday loans. While the APR may be shocking, it's important to remember that this is the interest rate if the loan is spread out over 12 full months, while title loans are meant to be a short-term loan for two to six weeks. State law requires stating an APR, it is not necessarily the best indication of the cost of the interest.
Title loans often have a flat fee per $100 borrowed, so the typical cost for a $500 loan for two weeks may just be $55. As Title Loans Houston points out, this cost can be lower than the cost of late fees, bounced checks, disconnection or reconnection fees from utility companies or a default APR on a credit card after a missed payment.
Title Loans Houston recommends consumers do their research before taking out a title loan. The industry is competitive, so it's possible to find a much lower rate by shopping around. Consumers should also borrow only what is necessary and affordable to repay to avoid the consequences of defaulting, as their vehicle may be repossessed.
When used responsibly, title loans can help consumers get through a difficult time and even save money, depending on their circumstances.
Title Loans Houston provides title loans to Houston residents between $500 and $15,000, depending on the vehicle's make, model, year, mileage and condition. Houston residents can learn more and apply online.
We provide affordable, short-term car title loans in Houston with flexible repayment terms and reasonable interest rates. They offer a quick, easy lending process with phone or online applications accepted and same-day delivery of cash up to $5,000.
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