Title loans usually the worst option for most borrowers
Most people who take out title loans aren't in the middle of an emergency. They just need help with regular expenses, said Jay Speer, executive director of the Virginia Poverty Law Center.
A title loan seems like an easy way out.
"Most people are happy when they get a loan," Speer said. "They get cash handed to them, and they solve whatever problem they have. But they're just kicking the can down the road and creating a much worse problem. The last thing you need is a loan."
That's because if you can't pay a $200 bill today, there is little chance you'll be able to pay back that $200, plus 200 percent interest, in two to four weeks.
Consider these alternatives.
Family: It may be embarrassing to hit up relatives for cash, but that temporary shame is easier to stomach than losing your car. For their comfort, put the loan amount and payback terms in writing.
Payment plans: Utility companies, homeowner associations, doctors and others often arrange payment plans if you can't pony up in full now. Some utilities offer balanced billing, which spreads big charges during peak-use periods over 12 months, preventing a budget-busting spike in any one month.
Credit unions: Member-owned credit unions have more flexibility than big, mainstream banks to make small personal loans. What's more, they offer lower-cost car title loans with interest rates of less than 10 percent, Speer said. Silver State Schools Credit Union lends against car titles for as little as 6 percent annually. SCE Federal Credit Union, with three locations in the valley, charges less than 3 percent.
Credit cards: If your card gives cash advances, it's better to swallow the high annual rate than the triple-digit interest you face borrowing against your car.
Crowdfunding: Websites such as GoFundMe, YouCaring and GiveForward let you plead your case for emergency financial aid. Consumers have turned to the sites to cover medical bills, legal expenses and other unexpected costs. Keep your story simple and have modest fundraising goals: CrowdCrux, a New York company that helps people run crowdfunding campaigns, said its research shows that 76 percent of people who raise money through industry giant GoFundMe set a goal of less than $1,000. The average amount raised is $1,126, most of which comes through outreach to friends, family and community.
Work: Talk to your employer about a paycheck advance or working extra hours for a few weeks. If you work for a big business, or a smaller company that uses a payroll-service firm, your benefits probably include an employee-assistance program to help workers in crisis. Get your employee-assistance hotline number from HR and call for advice on social services, community groups or financial counselors who might help.
Community agencies: Call your county or city social services division to connect with nonprofits and agencies that provide rental or utility assistance. Some federal housing agencies have local lending circles through which consumers build a community savings pool that they distribute to needy members.
Attorneys: If you already have a title loan and you're up against a repayment wall, talk to an agency — a local or state legal aid or poverty law center — that represents low-income consumers for little to no charge. In their constant quest for legal loopholes, short-term lenders don't always follow the law. Have an attorney read your contract's fine print and see if the company did anything illegal or unethical.
Contact Jennifer Robison at jrobison@reviewjournal.com. Find her on Twitter: @_JRobison
