With many in Alabama struggling with financial challenges, citizens are searching for ways to get into the clear. In Alabama, there is a growing trend in the loan industry: Many people are applying for car-title loans, which requires them to surrender their car title as collateral. If the loan is not paid back to the lender, then auto repossession may be initiated in order to satisfy the loan.
For example, a single mom who was seeking her college degree, was in the aforementioned financial situation. Due to school work and her responsibilities of raising a child, the young individual could no longer keep her part-time jobs and internships that provided income and kept her afloat during previous months and years. She went to Titlemax and in exchange for title to her car she was given a $3,200.00 loan with a monthly interest of $320.00.
This astronomical annual interest rate is illegal in more than 30 states. Despite such high interest rates, Alabama has the largest number of the vehicle-title loan outlets per capita. Further, Alabama is one of two states that allows a lender to keep the entire proceeds from the resale of the repossessed automobile after loan default.
In this case, the young individual defaulted on her loan and lost her car, which only added to the financial stress she was already experiencing. Losing a car can prevent individuals from doing everything they need to maintain their lives, such as getting to work or school.
Instead of going through with a loan in exchange for title to the car, bankruptcy may be a necessary option in order to save many during dire economic times. There are multiple types of bankruptcy, each with their own requirements and benefits for those who choose to file.
Bankruptcy may provide individuals with financial clarity and options that will allow them get back on their feet. Auto-title loans, while they may be easy and convenient, can have long term affects, such as forfeiture of a vehicle.
Source: The Birmingham News, "Alabama leads nation in car-title loan outlets," Sept. 23, 2012