Auto title loans lead consumers to financial disaster. : ThyBlackMan.com
(ThyBlackMan.com) In today’s still struggling economy, many consumers find themselves strapped for cash. When consumers seek credit remedy, one lender in particular is likely to bring more problems than solutions: the companies that provide auto title loans. For a list of reliable securities lending companies, click here https://www.facethered.com/online-title-loans/.
According to a new joint research report from the Consumer Federation of America and the Center for Responsible Lending (Certificate revocation list), the average car loan of $ 951 ends up costing the typical borrower $ 2,142 in interest. Nationally, 7,730 auto title lenders in 21 states are collecting $ 3.6 billion in interest on loans valued at just $ 1.6 billion.
The auto loan uses a borrower’s personal vehicle as collateral and also charges triple-digit interest rates, such as payday loans. And like payday loans, the typical car title loan requires a full repayment in just one month. When borrowers cannot afford to pay in full, they are forced to renew their loan with additional interest and fees. The report found that a typical client renews their loan eight times. You can receive car refinance here for example.
The report also found anecdotal cases in which the marketing practices of auto lenders lured consumers by advertising 25% per month interest on a two-week loan. The real interest rate, however, is equivalent to an annual percentage rate of 300 percent (APR). And it’s not like a 300% APR is an offsetting risk for the lender: Car title loans are typically only made at a fraction of the vehicle’s market value – around 26%.
When borrowers can no longer pay the interest, cars are foreclosed and additional charges are added to the borrower’s debt. On average, these repossession fees are between $ 350 and $ 400, or about half of the borrower’s remaining loan balance. The report found that one in six consumers were charged an expensive repossession fee.
It is easy to summarize the central problems of auto title loans. As the authors write in the report, these loans “have inherently inappropriate terms that force already vulnerable borrowers to pay more in fees than they receive on credit while putting one of their most important assets at risk. “
If you think there should be a law against this blatantly predatory product, be sure to notify lawmakers in your state. Most states with car title loan laws either do not have an interest rate cap or allow triple-digit interest.
Tracking the impact of these loans on consumers is one thing; financial reforms are another. In this regard, the CFA-CRL report calls for public policy actions at state and federal levels.
For example, the Federal Bureau of Consumer Financial Protection could enact protections regarding loan conditions and underwriting. States, on the other hand, could adopt ceiling rates of 36% on these loans.
Other policy recommendations include:
– Modification of loan conditions at equal monthly payments which would allow borrowers to gradually repay their debt;
– Require written notice to borrowers and the right to repurchase the vehicle before lenders repossess or sell the car; and
– In the event of the sale of a vehicle, return to the borrower any excess between a new sale price and the outstanding balance
In 2006, similar consumer protections were enacted to protect military personnel and their families. If President George W. Bush and Congress could agree to cap small loans at 36% per annum for this consumer sector, it seems reasonable that the rest of us would enjoy the same protections.
Written by Charlene crowell
Official site; http://twitter.com/charlenem2