Finance a college education with car title loanThis is going to be more of a “would you?” type of article.  I was watching some free over-the-air television on my Mohu Leaf and came across an interesting commercial that made me wonder.  Would you finance a college education with a title loan?

What is a title loan?

For those that are unaware of what a title loan is, here is a little breakdown.  A title loan is when you offer a lender your car title and allow them to place a lien on your car in exchange for money.  You can get a small loan pretty easily, but you can also get thousands depending on your car.  You have a payback period depending on your needs, but if you don’t pay, then you could lose your car.

The commercial was on during the late night schedule, but I have seen it more times now that I have taken notice.  There was a “real customer” that proclaimed that the said company allowed her to pay for her child’s college education with consistent title loans. This customer was getting title loans in order to pay for your child’s tuition.  This means that she was paying for multiple title loans.  The interest rates on these title loans are quite high and if you default, then the lender can repossess your car.  With the lien that they place on it, they technically become owners of it if you default on your loan repayments.

Not only are you paying high interest charges, but you could lose your car.  That would be a bad day to say the least.  What is the point of doing this just for a college education?  Why would you not just have you child work hard to pay for their own education?  Obviously, this customer had some money troubles, so trying to push her child through college might have not been the right answer.

Usually when someone gets a title loan, it is because they have bad credit and can’t qualify for personal loans or even use credit cards.  Why this is a bad situation to be in, I don’t think it is the right move to put up your car to borrow money.  I know that we all want to help our children, but I will not put myself into financial hardship in order to achieve this goal.  My son would have to put on his big boy shoes and get a job if he wanted to go to college.  That is just what the reality would be if it were me.

What would you do?

So, I just want to ask if you would finance a college education with a title loan (or multiple)?  Would you even take out a title loan if you needed money?  Let me hear it!

Photo courtesy of Center for Responsible Lending

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33 Comments

  1. I know there are desperate situations that might call for desperate measures, but sending your child to college is not one of them. There are far too many other options to consider to think that something like this would be a good idea.

    On a side note, I’ve been researching the things we need to cut cable and the Mohu Leaf is definitely one of the things I have on my list. Glad to hear you’ve enjoyed it.

    1. I agree Matt. I think you should tell your child to get a job and have them work through college on their own.

  2. Unless your car is worth a lot of money I doubt it would bring in enough money to finance a college education. I would pursue some of the other options available for financing a college education.

    1. This person apparently did multiple title loans. That means she would get the loan, put their child into a semester or two and then pay the loan off. Then she would get another one and do it all over again. Viscous cycle.

  3. Sounds like a second mortgage for a car. Why not finance college the old fashioned way, with credit cards? That’s what I did with the thousand dollars over the standford and perkins loans my tuition was each year.

  4. I’m not sure I would go for this, particularly with the amount of graduates who can’t find a job. College just isn’t the same investment in your future as it once was.

  5. I would not be doing this. There are many other avenues to pay for college. Maybe this child needs to find a job and pay his own way through school.

  6. Title loans are so terrible. I remember driving south eastern Alabama from my sister’s in Atlanta to the Florida gulf and seeing nothing on every corner EXCEPT title loan stores and the occasional fast food chain. Those places prey on people who don’t know any better and charge usurious loan rates.

    And speaking of paying for college, there are still a lot of adults out there who never went to college and think that all the struggles they faced will never befall on their kids if those kids go to college. DESPITE the fact that if that kid is going to a bottom-tier school and graduating with a Liberal Arts degree (Full disclosure, I was a Comm major), there’s a good chance that kid won’t have a super high paying job when she/he graduates. But that myth persists heavily, especially in more rural areas (my in-laws still sort of believe in that myth despite the struggles my sister-in-law continues to face in her low paying career and high loan debt).

    1. Avatar Derek | MoneyAhoy.com - Money Saving, Making Money, and Investment Ideas says:

      Good points. I think for a lot of these people, the college administrators that have enriched themselves off of this fallacy view it like shooting fish in a barrel.

  7. Haha, wow. There is no chance I’d ever do something like this. I don’t care how desperate I was. My child would have to drop out of college before I’d resort to a title loan. It’s amazing what some people will do nowadays. Title and Payday loans are two things that I will stay away from no matter what. They can both be pretty dangerous.

    1. I am with you Jake. I would make my kid work in order to pay for college. There is no reason to get out a title loan.

  8. Avatar Derek | MoneyAhoy.com - Money Saving, Making Money, and Investment Ideas says:

    Why don’t you just sell one of your kidneys and be done with it?

    This sounds like quite possibly the worst financial decision ever!

    1. Haha, yes, I guess you could sell a body part.

      I am with you. Financing your kid’s college education with a title loan is no good.

  9. I can’t believe that would work first of all. What college can you pay for with a title loan? There are a million reasons why you shouldn’t do this for most situations, especially paying for college. I think everyone should be able to go to college if they want to and have the grades and discipline to get a degree. However, if you have to resort to options like this, it would be better to work a few years and save up some money.

    1. You could pay for community college with a title loan. That would be easy. You could do it with a few semesters, but then you would need more and have to go back.

  10. In my banking days I used to make title loans, but they were usually to customers who could get a loan without collateral to begin with. They would use the collateral to secure a lower interest rate. This was about 25 years ago…so keep that in mind. 🙂

    If someone is in a situation where they are taking a loan out on their car, then their student probably has a healthy grant to loan mix in their federal financial aid. Even if they have loans, the rate is much lower than the rate on the car loan and payments won’t start until after they graduate.

    As far as students paying their own way, my daughter works 20 hours each week during the school year and doesn’t come close to paying her expenses…and she’s pretty frugal for a 19 year old.

    1. I appreciate your comment Betsy. Thanks for stopping by. I have known quite a few students, many of them friends that paid their own way through college. It was difficult, but it can certainly be done. Many students do this each year.

  11. I agree with Matt here – college is definitely not a necessity and I would definitely work with my kid to help her/him earn the money to make it through on their own instead of taking out a title loan. Too risky.

  12. Yeah I wouldn’t do that, instead applying for financial aid and having the kid and yourself work extra for perhaps a few years out of high school would be the best bet. You can go to college at a slower pace too, like going part-time, and paying for some along the way as well. This would get the kid through college after a longer amount of time, but they would still be able to graduate with far less debt without any drastic measures like that. College is important, but even getting a 2 degree instead of anything higher at first would be a much better option. There’s much smarter ways to go about it.

    1. I am with you Kayla. There are many ways that someone could do this in a smarter way. A student should work instead of having their parent get a title loan. It is just crazy.

  13. I definitely wouldn’t take out a title loan, yea you make get a few grand to pay for school, but if you default and then lose your car and can’t get to school or your job…what was the point. You’ll just take on more risky debt to get another car and go deeper in. What is funny is driving back from Delaware from the beach, as I got closer to Philly every other billboard was for car title loans. They definitely prey on those in inner cities as that is usually where the largest segment will use such loans.