Dear Consumer Ed: 

I saw a billboard that said I could refinance my title pawn.  Is this just a lower interest title pawn, or is it a way to keep from losing my car if I am late with a payment?

Consumer Ed says: 

It sounds like this company is likely just offering possible lower interest title pawn financing.  When refinancing any type of loan agreement, the amount owed under the old agreement is paid off in exchange for a new loan with new terms.  There are two advantages to refinancing a title pawn, but there is also a potential drawback. The first benefit is that payments due under the new agreement should be lower than your old agreement.  Lower interest rates might now be available to you due to changes in market conditions or the improvement of your credit score.  Second, title pawns, unlike other loans, are usually issued for only 30 days, after which the entire loan becomes due.  Refinancing your title pawn would give you more time to repay your loan. 

The potential disadvantage is the risk of falling into the trap of having to constantly refinance your title pawn.  Before you refinance, ask yourself if you think you’ll be able to pay off your loan one month from now.  If you can’t, you’ll be in the same position you are now, and you’ll either have to refinance again or risk losing your car. 

If you are thinking about refinancing your title pawn, you should make sure that the company through whom you will be refinancing has a good rating with the Better Business Bureau (www.bbb.org).  Remember, as long as you are using your car as collateral for a loan, you run the risk of losing it if you’re late with any payments.

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