Finance

If you live in Chicago, then you have probably heard of title loans. After all, they are advertised all over the television on a regular basis. Just in case you’re not “in the know,” however, these loans are special loans that allow users to get cash instantly by putting their car or motorcycle titles up as collateral. For people who use their loans wisely and who pay back their loans as agreed upon, title loans are a great option. Unfortunately, though, many people are not smart with their loans and wind up in serious debt because of them, which is becoming a very widespread problem in the Chicago area.

The important thing to understand about title loans is that they are considered “high interest loans.” In other words, the interest that one can expect to pay on them is very high when compared to the average bank loan. However, the reason for the high interest rates is because most lenders who opt for this type of loan have poor credit and/or loan repayment histories. Thus, the lenders who loan to them are really taking a chance and going out on a limb for these borrowers, so they have to charge higher interest rates to make up for the risk involved.

The problem with this high-interest type of financing is that, when a borrower misses one payment, the interest compounds, meaning that if a borrower falls behind by just a little and doesn’t then get things in check, he will fall further and further behind until it’s impossible to find a way to get out of debt. Sadly, this is something that has happened and continues to happen to many Chicagoans on a regular basis.

While many are quick to blame the lenders and to label them as “predatory,” the truth of the matter is that the responsibility really falls on the borrowers. These lenders are very upfront about their higher interest rates, and, for the most part, urge lenders not to borrow from them unless they can truly afford their payments and meet all terms of the repayment agreement. Many lenders even work out specific repayment plans tailored to the borrower’s needs and budgets, but sadly, a lot of borrowers are not honest during this part of the process, fearing that they will not be given loans if they are honest about the state of their finances.

The bottom line is that, when borrowers get in debt, it really is their fault, and the lenders should not be blamed. To avoid going into debt, potential borrowers are encouraged to thoroughly research any lending company before agreeing to a loan with it. They are also encouraged to be open and honest when negotiating the terms of their loans and to compare interest rates from different lenders to find the best possible loan deal.

While so many are quick to blame lenders for the big debt problem among Chicagoans, the responsibility really remains with the borrowers, and while that may be a hard pill to swallow, it’s an honest one.