Right now you might be in a financial pinch. If you’re new to Silicon Valley or new to the country and you don’t yet have your finances settled, you could need a quick loan today for an important purchase or payment.
California and 18 other states allow borrowers to obtain loans using their vehicles as collateral without needing good credit or even proof of employment in some cases. Car title loans are supposed to be short term even though they can be extended, and some must be paid back within 30 days. The catch with these types of loans is the interest rate, and those can be astronomical depending on where you live. Some states have do not cap the interest rate that lenders can charge (which typically is a triple-digit APR) while others limit the interest rate in some way. Other states outlaw car title loans altogether because they’re seen as predatory.
Drowning in Debt
KeyPoint Credit Union does not engage in such lending practices, but the car title loan option is so prevalent here in California that we think it should be addressed. Plenty of research and opinions exist about car title loans. The Center for Responsible Lending and the Consumer Federation of America released a detailed report earlier this year
that indicates Americans are spending $3.6 billion in annual interest fees on $1.6 billion in loans; and the average borrower renews a loan eight times, paying more than $2,142 in interest for $951 of credit. And as the reported noted, “A typical borrower receives cash equal to only 26% of the car’s value yet pays 300% APR.”
Edmunds.com, which provides all types of resources and information to vehicle buyers and sellers, warned readers about car title loans
but also balanced the debate with some thoughts from a director at the Libertarian think tank Heartland Institute.
“It’s a good way for some people with few assets to get money and, in many cases, can be less expensive than the alternatives,” Eli Lehrer of Heartland Institute told Edmunds.com.
KeyPoint Offers Better Alternatives
Financial counselors typically agree that car title loans should be avoided. Aside from the exorbitant interest rates, a borrower who defaults on the loan will lose the vehicle to repossession and that vehicle could be the sole mode of transportation to work, school, etc.
AOL Autos points out
that a better alternative could be “paycheck cash advances from your employer, cash advances on credit cards, emergency community assistance, small consumer loans, or borrowing from friends and family.”
If you’re a software engineer in Silicon Valley and a KeyPoint Credit Union member, we provide borrowing options for people who are struggling financially or have low credit scores. We offer personal loans and lines of credit based on your signature and good name
; loans secured against your personal stocks, certificate account or savings account
; and loans tailored to people who have been turned down elsewhere or who are new to the country
We’re eager to help you find a better solution than risking your vehicle or paying outlandish interest rates. Contact us