An auto pawn loan rollover is part of a typical auto pawn loan or car title loan agreement, where a potential car buyer uses their existing vehicle as collateral to secure auto loan terms for a new purchase. An auto pawn loan is sometimes called a balloon payment car loan because lenders will request a lot of money at the end of the short loan term. These are also called bad credit car loan options because lenders offering auto pawn loans are less likely to assess the borrower’s credit history.
Auto Pawn Loan Rollovers
The rollover refers to what happens at the end of the auto pawn loan term, which is generally very short, such as two weeks or one month. The rollover happens if an amount on the loan is unpaid at the end of the term. What happens in a rollover is that the unpaid balance goes into a new loan term, often with a much higher interest rate.
What Happens with Auto Pawn Loan Rollovers
Too often, a lender uses multiple rollovers to spike interest rates that add up to extremely high debt, where a customer may never be able to repay the total amount. Because of this, state and federal governments are looking at limiting auto pawn loan rollovers and forcing lenders to advertise the risks of these types of loan agreements.