Title loans offer quick cash but at a high cost
Denise Greiner
Many consumer advocacy groups caution that title loans are a short-term fix with a long-term expense.
Title loan stores have sprung up all over the valley.
One such shop is Title Max, on the corner of Gilbert St. and Guadalupe.
A sign at the front of the store proclaims: “Apply today! Get approved! Get your cash! Get your title back!”
Joe Wetson, a consumer advocate with The Fairness in Lending Coalition would argue that the process isn’t that easy.
“A person finds themselves in a financial dilemma, with no access to conventional borrowing.
One of their few possessions is a vehicle with a clean title. They use that to secure a loan with a monthly interest rate of approximately 25 percent. That’s equivalent to 300 percent annual percentage rate (APR).” Wetson said.
That means that on a $1000 loan, the borrower would be required to pay back $1250 when the loan comes due in 30 days.
Wetson said, “The risk is not so much that the borrower will lose their car. These places don’t want the hassle and expense of repossessing and reselling the vehicle. They want to continue extending the loan as long as possible.”
In a recent study by The Southwest Center for Economic Integrity, they found large clusters of these stores in low-income, minority areas.
The study showed that the average consumer of these loans had a median age of 24, was a renter with an income of less than $20,000 a year, had no bank account and no ability to acquire credit by conventional means.
The majority listed their vehicle as their only property of any value.
Kelly Gilmore, a single mom living in Gilbert, recently found herself in need of cash.
Gilmore said she had a title loan with another company and had extended it seven times.
Gilmore now owed $2,440 on an original loan of $900.
Gilmore said, “I have crappy credit because of a complicated divorce. The bank closed my account because of bounced checks, and now, my options are limited.”
Such loans have been described as “predatory practices” by the SCEI
