Motor Vehicle Title Loans
A somewhat disturbing retail presence is visible in Cleveland’s E. 55th neighborhood. Shops are offering short-term loans to vehicle owners, by using the car’s title as collateral. The consumer is basically seeking fast cash for cars. Many view this as similar to taking out a second mortgage on a home, but many question the legitimacy of these operations. The October 18, 2014 NYT Editorial Board topic ‘A Rate Cap for All Consumer Loans’ discussed this topic as follows: “The Obama administration has proposed improvements in federal rules to protect service members from predatory loans that trap them in debt. The predatory loans are not unique to them. For example, the federal Consumer Financial Protection Bureau found that hidden fees & charges on payday loans were so high that only 15 percent of borrowers could raise the money to repay the total debt on time without quickly borrowing again. Nearly 2 of 3 borrowers were forced to renew their loans — some more than 10 times — depleting their resources and digging them deeper and deeper into financial holes.” The full story is available here http://www.nytimes.com/2014/10/19/opinion/sunday/a-rate-cap-for-all-consumer-loans.html?_r=0
A Loan is a Loan
The fundamental thing to remember for younger people is that a loan is “what it is”. Merriam-Webster Dictionary defines a loan as “an amount of money that is given to someone for a period of time with a promise that it will be paid back”. The US is an environment that is set-up to encourage the borrowing of money. In our business of scrapping cars there are two types of cars: those that are running and those that are not running. To get “cash for my car” we regularly receive calls from non-running vehicle owners stating “but I just spent $300 on new tires and $210 on a new radiator”—bad news, the cash for my car buyer doesn’t care. To get fast cash for cars, the buyer who is scrapping cars is going to assume that the vehicle is in poor condition. They have fixed overhead costs such as wages for the driver, the vehicle used for scrapping cars and insurance, which is pricey. They cannot afford to send someone out to pick-up a vehicle based on your verbal description; therefore, the junk car quote from a guy scrapping cars will be done under the assumption that they will pay fast cash for cars but not pay a lot of cash for my car. When looking to get fast cash for cars, it is important to consider your options. The reality is that the usual cash for my car seller is often in a tough situation. Can you imagine still owing $2,000 for a scrap car that needs a new transmission that costs over $2,000?
Local Government offering Auto Title Loans
According to WFAA (ABC 7, the local government in Dallas has established a non-profit program that will compete in the fast cash for cars (title) market. The highlights are as follows: “Community Loan Center of Dallas, which will soon start lending up to $1,000 for a one-year term at 18 percent interest through its website, CLCofDallas.org.” According to Rob Norcross, for the Consumer Service Alliance of Texas “the short-term borrowing market grew in response to consumer demand that was not being met by existing lenders. Payday and auto title loans were a market-based response to consumers’ inability to access credit to meet emergency financial needs. We welcome innovation in a competitive financial services marketplace.” The complete story is available here: http://www.wfaa.com/
So it seems the local government is intervening in the short-term consumer loan market. I’m not sure that it makes things a great deal better. Meeting the needs for “emergency loans” is now a government provided service? What ever happened to the forgotten concept of having a savings account? How about people placing money into a “rainy day fund”? The government wants to be the lender of last resort for it’s citizens?
