Loan basics: Questions and answers

SOURCE: Tribune reporting

June 22, 2008

What is an auto title loan?

It is a short-term loan secured by the title to a vehicle. The borrower keeps the car while the lender holds the title, and often a key, as security. Interest rates vary.

How much are interest rates?

In Illinois most firms charge 300 percent a year. Online loans can be far more expensive, and contacting the lender can be difficult.

What if you don't pay the loan on time?

The lender can renew the loan, thereby pushing up the amount due in interest and fees. Or the lender can repossess the car.

What do you need to know about such loans?

Typically they involve a balloon or much larger payment on the last installment. So the borrower should make sure such a payment is affordable.

Learn the company's rules about late payments and repossessions.

Compare lenders' interest rates and check with state officials for records.

Complaints against lenders? Contact the Illinois Department of Financial and Professional Regulation, www.idfpr.com or 312-814-4500.