Lenders will give you a $1,000+ loan with no credit, only if you sign for a super high APR and give them your car title, too.
Auto Parts City, my favorite Illinois-based salvage yard on social media, posted up a video of a 2006 Dodge Charger with a loan document left inside by the previous owner for an $1,100 loan with a 167% APR.
Credit cards, with interest rate APRs around 23%, don’t even charge that much.
Check out the video and a screenshot of the loan document and car in question below.
Based on the situation and APR, you can surmise this isn’t your ordinary loan.
The previous owner of this Dodge Charger took out a Title Loan or, “a secured loan that lets borrowers use their vehicle as collateral.”
As it’s a secured loan, title loan applicants have poor credit, no credit, or don’t want their credit run, at all.
To ensure the lender makes a profit (because lenders aren’t charities), they tack on a high APR and secure it with your car as collateral.
One of the most helpful comments on the above video came from Kris Karter, who goes by @hey_mr.carterrr on Instagram.
“It’s essentially selling the car. That’s what the 160%+ interest is for. It covers the sketchiness of the people who come into title loans. If they make even half of the payments and bail, you get all your money back AND a car. If not, you get a car that you appraised at least double what you loaned out. It’s predatory, but that’s on both sides and the numbers reflect that, Carter explained to another Instagrammer.”
“It’s basically for people who need money more than they need a car, and they need that money today. People who don’t have access to that kind of money in the first place typically don’t have good credit, and they’ve probably burnt every bridge around them if they had any, so their only option is to decide if they need that car more than they need that money.”
“That makes them a BIG risk. Banks won’t do business with them. Credit Unions won’t do business with them. Title loan guys WILL, but it’s a business, and they have to ensure that they make money or the business won’t exist at all. It’s basically the same thing as a pawn shop.”
If you don’t have a positive opinion about these kinds of lenders, Carter explains how, in this situation, the Charger owner got one over his lender.
This Charger owner probably knew his car was running on borrowed time and was essentially worthless.
Instead of going through the rigmarole of trying to find a buyer or getting next to nothing at a salvage yard, as Carter stated, in a roundabout way, he essentially sold a lemon to the title loan lenders.
“Nah, he finessed the system.”
He had a bad car, took a title loan for a crazy fee that he knew he’d never make the first payment on, and then walked away from the car with enough money to put a down payment on a new car…and since it was a title loan it didn’t affect his credit score…the company just gets the title to the junk car. That’s why he left it on the seat.
This Charger owner probably didn’t disclose how bad things with his car actually were.
When you’re in the business of title loans, the onus is on you to verify the loans you’re handing out are on legit cars, and not junk.
And, when you’re dealing with so many loans a day, you probably have to make a judgement call based on what information you have right then and there, a gamble.
In this case, the lender had the cards stacked against them, but even then, they probably got a $100-$200 in salvage value, despite in being wrecked.
“You can take advantage of them, but only because they’re taking advantage of you. It’s sad that it’s necessary at all,” Carter wraps up his previous comment above.
Not legal in all 50 states
As Carter stated, title loans are generally for people who need money more than their car. While in this case, he took advantage of the system, in 99 percent of the case, it’s the system that’s taking advantage of the loan recipients.
For numerous reasons, most often stemming from systemic poverty, someone seeking out a title loan is often forced to if they want to, for example, stay in their house, pay for life-saving medication, are feeding an addiction and/or are just plain ol’ financially illiterate.
For these reasons, among others, it’s why title loans lenders are typically seen as predatory or taking advantage of poorer communities to extract profit.
It’s also partly why title loans are illegal in close to half of the 50 states.
In those states where title loans are legal, restrictions like only taking a title loan up to a certain dollar amount (only up to $500 in Rhode Island) or capping APR (like only 10% in Texas,) aim to curb how far a lender can take advantage of you.
In Illinois, where this title loan was taken out, at one point there was no limit on maximum APR, hence the 167% APR as of the title loan date around 2018.
But, as of 2021, various Illinois consumer loans, car title loans included, are now capped at 36% APR.
Keen eyes will notice the year of this particular loan was in 2018.
So, not only did this Charger owner probably not pay off his loan, but he then evaded getting repo’d for another 4-5 years.
Gamed the system? Sounds like it.
