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States Wrongly Cracking Down on Car Title Loans

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Several states are putting limits on the car title loan industry. This is where people take out short-term loans with high interest rates using their cars as collateral and no credit check. The lender gives them a few thousand dollars for a piece of paper which says they own the rights to the very car they watch drive off their parking lot with their money. While this is a completely voluntary transaction for both parties, some states seem to think they should step in and intervene in the marketplace. Wisconsin, for example, is making this type of lending completely illegal. Other states place heavy regulations on lenders and caps on amounts.

First of all, the states have no moral right to intervene in this way. Both parties voluntarily agree to the loan and should have every right to do business with each other. Secondly, most banks and credit unions will not deal in this type of lending, but the need for short-term cash will not magically go away. In many cases that is the short-term money these people need to keep their electricity on or to feed their kids. Since no legitimate business will be able to offer these services, loan sharks will. In the name of protecting these borrowers these laws will end up harming them. Are people really better off dealing with a loan shark? For every well-intentioned government intervention there are going to be unintended consequences, which are often worse than the problem the intervention was meant to alleviate.

Comments

Liberty_One 4 years, 5 months ago

I'm sure some think these "predatory" lenders are evil, but they provide a service the market demands. The majority of transactions run smoothly, with the borrower getting much needed short-term cash which they pay off relatively soon.

grammaddy 4 years, 5 months ago

You bet they do, the interest rates are astronomical but for some ,it's the only way to get cash in an emergency. I got $250 for a mini-van less than 10 years old. Had I paid off that loan on their timetable, I would have paid back 3x the loan I took. And I wasn't about to screw it up and lose the van.I paid it back within 30 days and was offered a $275 loan on the spot. Thanks, but no thanks.

grammaddy 4 years, 5 months ago

I do that with credit cards,too. I hate any kind of debt and try to pay it off quickly.

whats_going_on 4 years, 5 months ago

"For every-well intentioned government intervention there are going to be unintended consequences, which are often worse than the problem the intervention was meant to alleviate."

I don't agree with you on a lot, but I actually kind of liked this comment, and a lot of times, its true. And that goes with any intervention, or any decision, really. The problem is, no one "fix" is going to be able to help everyone, so there are always going to be some left in the dark.

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