Putting your vehicle up for collateral for a short-term, high-interest loan can leave you both cashless and carless. Car title lenders are raking in big bucks here in Virginia, but it's risky business for folks who need the cash.
An attorney with the Legal Aid Justice Center in Charlottesville says the reason car title lenders are making big bucks is simple - customers are desperate for quick cash and the interest rates are staggering.
State data says Virginia car title lenders gave out $180 million worth of loans in 2012, up from the $125 million in 2011.
Cherie Seise with Bank on Greater Charlottesville says many people don't know there are other options. She hopes a pilot program offered through the city of Charlottesville will steer people away from these high-interest loans.
"We help folks get into free checking accounts, second chance accounts if they had difficulty with accounts in the past," she said.
The State Corporation Commission says in 2012 about 20 percent of borrowers failed to make a monthly payment on a car title loan for at least 60 days. It says about 80 percent of more than 13,000 vehicles repossessed were sold by lenders.
Within a mile stretch along Route 29 in Albemarle County there are four different places you can get a car title loan - Loan Max, Title Loans, Fast Auto Loans and Payday Loans. The process only takes 30 minutes - but the repayment can take a lifetime.
"The average interest rate on the loans in 2012 was 224 percent," said Brenda Castaneda, attorney for Legal Aid Justice Center.
Castaneda says people come to the Legal Aid Justice Center hoping to get out of a car title loan.
"They're taking advantage of people who feel like they don't have other options," she said.
She says often times the only way to get out of the loan is if there is a problem with what is disclosed to the borrower in the contract.
"Just don't do these kinds of loans, there's a lot of other options for people and it's important to not feel like you're in such a corner that you have to do a loan like this," Castaneda said.
Up until 2010, car title lenders weren't regulated in Virginia. Now - there's a limit on how much the companies can charge, lend and the length of the loan.
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Tuesday, December 3 2013 11:42 PM EST2013-12-04 04:42:52 GMT
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