A car title loan is a short-term loan that uses your vehicle’s value as collateral. In Alabama, title loans are regulated by the Pawn Shop Act and allow up to 300% annual interest rates. The borrowers must pay the loan balance plus fees in order to redeem their vehicle’s title. Many borrowers renew their loan for multiple terms and end up paying more in the long run than they originally borrowed. URL

In the final semester of college, Frances Beck was struggling to keep up with her bills and provide for her young daughter. She decided to take out a title loan to cover expenses. She signed a contract that put a lien on her car, and if she was late on payments, the lender could repossess her vehicle and sell it. The company she used, TMX Finance, was accused of misleading customers in Georgia and Alabama by masking the true cost of their loan through add-on fees, but the company settled with the state and paid a $9 million fine without admitting to wrongdoing.

Navigating Financial Solutions: Understanding Title Loans in Huntsville

The Consumer Financial Protection Bureau recommends that people who need immediate cash consider alternatives before turning to a title loan or pawnshop. The agency suggests asking a relative for a loan or seeking out a credit union, which may offer lower fees. Also, those considering a title loan should carefully read the terms of their agreement, which often include extra charges such as origination fees, document fees, key fees and processing fees.