A car title loan is one of the many micro-loans that you can enjoy almost anytime in many states in the country. This type of loan allows you to use your car as collateral in case you need cash fast. This is often considered by individuals who need cash as soon as possible but do not have the access to available funds.

This type of loan sounds very simple but could be very dangerous if you’re not careful. The following are some considerations you need to remember before agreeing to any car title loans.

1. Car title loans is like pawning your car - pawning is when you present your valuable in a pawnshop and you’ll be provided with cash based on your pawned item. This is the same with car title loan except that you can still use your car.

2. Small but crippling loan - the interest rate of pawned items are relatively high but it can get higher with car title loans. Because of the depreciation of cars, the lenders are taking too much risk in offering you a loan based on your car. You could be spending years instead of months just to pay off a $2000 loan.

3. The fine print says it all - car title loans offered by lenders are always protected by law. They can get away on charging you with exorbitant fees and interest rates because they are all stipulated in the fine print but you just failed to read it.

4. No government protection - unfortunately, some states do not regular car title loans. This means lenders are free to exploit their customers in terms of interest rate and the terms and conditions on the loan. If you’re not careful, your car might be seized.

5. Comparable to payday loans - as already indicated the process of gaining loans is almost the same as any pawnshop but the payment process is almost the same as payday loans. If you can’t pay for your loan in the first month or two, your loan can easily balloon exponentially.

6. You could end up losing your car - pawning your car means you have to pay them within the period of time or else you’ll lose your car. Most of the time lenders will not allow any extension especially if you didn’t provide considerable payment for your loan.

7. Crippling fees in some companies - there are companies that are never satisfied with simple interest rate. You will have to pay for additional fees as well during your payment period. Ending up paying more than a principal is always a possibility in this type of loan.

8. Fast cash is always bad news - just like payday loans, pawnshops and other form of loans that offers cash in an instant, car title loans always have a hook that can cripple your finances if you’re not careful. Be sure you have a good source of funds to payback the loan fast.

9. The rollover problem - one of the reasons why a small loan could increase exponentially is the rollover of your debt. Rollover of your small fees and interest will increase your debt in just a month. Miss the payment for two months and you’ll have a very hard time paying for the loan.

10. Seek alternative - if you’re considering this type of loan, seek alternatives first. There are non-government organizations or simply your friends who can lend you a small amount for your temporary needs. These loans have little to no interest so you should be able to pay off your loan the soonest time possible.