Title loans Birmingham, Alabama, also known as a car title pawn, allows consumers to use the equity in their vehicle to secure a short-term loan. In return, the lender takes a lien on the borrower’s vehicle. If the borrower does not pay back the full amount of the loan, including interest and fees, the lender may repossess and sell the vehicle. Consumer advocates call this type of lending predatory, because it often involves high interest rates and fees that make it difficult for borrowers to pay off the debt.

The industry defends itself by arguing that title loans provide a necessary service to people who have been written off by the financial system. But consumer advocates argue that the fees and terms are exploitative, often resulting in borrowers taking years to pay off the loan. A 2019 survey by the Consumer Financial Protection Bureau found that borrowers on average paid more in interest than they received in principal over the life of their loan.

The Ins and Outs of Title Loans: Birmingham, Alabama Edition

Many borrowers, including some with the best credit, are stuck in cycles of debt that they can’t repay. The bureau recommends that borrowers consider alternatives to title loans such as asking a friend or family member for money, looking into emergency assistance programs in their community, or talking to their creditors about extending their repayment periods. Borrowers can also try getting a cash advance from their credit union. This article originally appeared in ProPublica. It is reprinted with permission.