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Auto Title Loans

An auto title loan is a short-term cash loan, in which the consumer’s title to the vehicle (car, truck, motorcycle) serves as collateral. If the consumer misses payments or does not repay the loan on time, the lender can take the vehicle.

Consumers should exercise caution before borrowing money with an auto title loan because it tends to be a very expensive form of credit and you can lose your vehicle. 

If you are considering an auto title loan, the Commerce Department offers the following consumer tips:

Check to confirm that the company is licensed to make auto title loans in the state.

Use the License Lookup tool on the Commerce Department’s website to see if the business is licensed as either an “industrial loan and thrift” or “regulated lender.” 

There are unlicensed lenders that offer auto title loans through the internet, but they do not comply with Minnesota consumer protection laws, especially limits on interest and finance charges. 

Don’t borrow more money than you can afford to repay in the time due.

How much a company is willing to lend you is not the same thing as how much you can afford to repay. 

Pay close attention to the schedule and amount of required payments, as well as the total interest and finance charges that can add up quickly over time. 

Before you take out a loan, read the contract thoroughly and be sure you understand all the terms and costs. 

Once you sign the loan agreement, you are legally responsible to fulfill your obligations.

Understand that the lender will put on a lien on the title to your vehicle, so you are unable to sell it without first paying off the loan and interest.

Also, many lenders now require you to install a GPS device to track the vehicle’s location so it can be quickly repossessed if you miss a payment. Some lenders even require a starter interrupt device (“kill switch”) that will remotely disable your vehicle’s ignition so it cannot be driven if you miss a payment. 

Above all, consider alternatives. 

Because of the high cost and the risk of losing your vehicle, an auto title loan should be a last resort.

If you have a short-term need for cash, try to borrow from a family member or friend, see if your employer will provide an advance on your next paycheck, find out if your bank or credit union provides short-term credit products, or ask creditors for more time to pay your bills. 

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