Title Loans, Payday Advances, & How Some Lenders Keep Working Americans In Debt
If you have ever borrowed money to pay a medical bill, you're not alone. If you have ever taken out a title loan to pay for someone else's funeral expenses, you are not alone. If you have ever lost your job, and moved your family of 6 into a 1 bedroom apartment, then you are not alone.
Most Americans do not have $500 in emergency savings to cover an unexpected loss. Many Americans have seen their pay and hours cut so many times that they can no longer afford to save money, and need every paycheck just to pay their outstanding credit cards and loans.
There are plenty of people in America who borrow from Peter to pay Paul - they use repeated balance transfers and loans to make minimum payments until they can no longer move money around. As of August 2020, the average household in America had about 80% debt-to-GDP ratio. That is the average! This means many more must pay only the minimum payment every month, and hope that their jobs improve in the future, all while building massive amounts of interest they may never be able to repay.
In many states, title loan companies can lend the full amount of a vehicle's value due and payable in less than 30 days after the company first loaned the money!!! This means if the party does not immediately pay an extremely high sum like $10,000, then the creditor can immediately repossess and take the vehicle. The creditors have nothing to stop them from charging 90 % or more in interest, and many times the average person may only have 2 options: (1) give up the vehicle for repossession; or (2) file bankruptcy and request a valuation of the vehicle to lower the interest rate.
Pay advances often work in a similar way. Some payday lenders may hold a personal check that will become due with interest, and if the person does not pay off this loan the Debtor may end up bouncing a check and facing criminal penalties. But Wait! I thought we had done away with throwing people in jail for debts!
Even your home may not be protected. If someone makes years of timely mortgage payments, but loses their job and runs up credit card payments, a creditor can try to execute a lien on their home! This means your home mortgage may be underwater immediately, and you will swiftly lose out on any opportunity for Home Equity Line of Credit or similar equity-enhanced opportunities.
So what do you do? If you have already been sued by collectors or fear eviction from your home, call a debt relief lawyer. Many debt relief lawyers may be able to help you keep your car and/or home, depending on your circumstances. If you do not want to talk to a lawyer, talk to a certified financial credit counselor from a legitimate and credible agency. If you do not feel comfortable speaking with someone, then look online for free budgeting tools from credible organizations. Establishing a budget that spends less than you earn sets you up for a path to freedom from debts.
If you feel like you're being taken advantage of by big lenders, you may be correct. Feel free to call me at 256-361-9829, for a free consultation.