Getting car title loans in Bakersfield is one of the few ways through which individuals can comfortably meet their day to day financial obligations. Let’s face it, when your rent, electricity, phone and even car repayment bills are all due and you simply do not have enough money coming in, you will need some kind of help to make it through without going ‘past due’ on those bills.
What is Car Title Loan Refinancing?
One way to ensure that all those bills do not become too much to bear is to consolidate and restructure some of them so you are paying less every month. For example, if you have a car loan with one company you can easily refinance it with another company so you are paying less every month, but for a longer period.
Basically, car title loan refinancing is very much like selling your existing loan to a new financial institution. The new company buys that debt from the old company and offers you new terms which often include:
- Better interest rates
- Smaller monthly repayments
- Longer term period for payment
While this gives you some breathing room as it reduces just how much money you have to spend every month on debt servicing, the truth is that there are some loopholes that most people do not look into before signing on the dotted lines.
Here are some problems with title loan refinances that you should know:
Problems with Title Loan Refinances you should know
Those Interest Rates could Skyrocket
While most title refinancing companies promise you a land full of milk, honey and low interest rates, the truth is that some of them flat out lie to you. Studies have shown that most lenders charge more than 25% interest to finance the loan every month. That is amounts to an APR (Annual Percentage Rate) of about 300% . This is not even inclusive of all the little additional fees that each lender asks for to process the loan.
It is therefore important to first seek out a refinancing company that you know you can fully trust not to throw you a curve ball while you try to pay down the loan.
Most Borrowers Throw Caution to the Wind
Car title refinancing is a slippery slope especially when you start thinking of how much less you will need to pay per month. In your mind, if you had to pay $300 per month with the previous company yet the new company is promising to cut that down to $125 per month for a longer term period, you may think that you have saved yourself $175.
What happens then is that you start thinking of borrowing a much larger amount; one that will bring your total monthly repayment to at least something closer to the $300 that you are used to paying. After all, you have proven that you can pay $300 so why not try $250 for a bigger loan?
That kind of thinking will land you in deeper debt and keep that cycle going for much longer. The idea is to try and get out of debt, not get into more.
You get Comfortable
This has a lot to do with the previous point. The fact that you can refinance your car and get more money should not mean that you can get comfortable and keep doing what you are doing now. The trick for getting out of debt is to ensure that your monthly payments remain the same despite the lower refinance rates.
Yes, instead of asking for a larger loan so that you can pay the $300 you are used to, you should ask for something you can afford at a lower rate (the $125 we talked about) but keep paying $300 to get out of the hole faster. Do not get comfortable and spend the money you save on frivolities.
There are Unscrupulous Lenders out there
While there are strict financial lending regulations that govern the entire industry, the truth is that there are still unscrupulous lenders who act in a predatory manner. These are lenders who will willingly lend you more than you can handle just so they can gain possession of your assets and auction them off for more. Only borrow what you can afford to pay back.
You Run a Risk of Continuously Rolling Over your Debt
Closely tied to the previous point, a 2016 report showed that car title loan borrowers tend to roll over their debt an average of 8 times. At the end of it all, the borrower ends up paying almost thrice as much as they originally borrowed. Rolling over your debt incurs higher rates and longer repayment periods. Avoid it all costs.
Easy Access to Financing Encourages Poor Money Management
Even though car title loans make for one of the easiest ways to get financing in Bakersfield, some people take advantage of this information to make poor financial choices. If you are looking for a little cash to go to Vegas over the weekend, DO NOT take out a car title loan. This kind of financing should be reserved for emergencies only.
It is Very Risky Business
Apart from exorbitant lending rates, easy to fall into traps such as rollovers and unscrupulous lenders ready to take advantage of your need for money, car title loan refinancing is generally quite risky. You could end up paying way more than your original loan and you might even wind up losing your car if you cannot keep up with the payments.
The trick lies in finding a car title loans company in Bakersfield that you can trust. You also need to have enough financial discipline to know that this option should only be used in emergencies.