Friends Don’t Let Friends Use Car Title Lenders
Car title lenders spend a lot of money on commercials and they make it easy to borrow on your free and clear car title but stop before you borrow from them…. Do you know what you’re getting into? According to the Consumer Financial Protection Bureau (CFPB), car title loans offer a typical annual percentage rate of 300%, the average loan is about $700 and one-in-five auto title loan borrowers have their vehicle seized for failure to repay leaving borrowers with no transportation. They only loan you 50% or less of the car’s value.
These loans are typically set up as single payment loans which are difficult to repay in one installment. They are continually renewed with additional fees and interest which is why the annual percentage rate is so high. The CFPB is starting to crackdown on these lenders but some borrowers are already caught in the trap.
Many lenders consider these low balance loans as unprofitable. That is the excuse used by car title lenders for charging usury rates. But there are lenders who loan low dollar amounts and don’t charge high rates, credit unions.
Yes, you have an alternative; talk to a credit union. Most credit unions offer used vehicle loans at very reasonable interest rates and payment terms. Even if you have questionable credit, more credit unions are investing in C & D borrowers. If you can explain why your credit has suffered, credit unions will listen. You may even be able to find a financial counselor to help you budget and rebuild your credit. By law, credit unions can charge a maximum interest rate of 18% on loans. Credit unions are cooperatives; member organizations which philosophically want to assist people. Credit unions are the alternative to car title lenders.
It used to be that you had to work for a specific company or union to open an account at a credit union but credit union membership is much more open now. You can find a credit union for you right here: http://www.asmarterchoice.org/find-a-credit-union
Cindy Rein-Zima is the President/CEO of Hamilton Horizons FCU