I was watching a consumer-oriented news report on the local CBS news tonight and it concerned car title loans. Apparently you put up the title to your vehicle as collateral on a loan. Sounds pretty straightforward right? Well the catch is that the lenders tend to charge huge interest rates on the loan, which is completely understandable considering that a the collateral loses value at a huge rate. If you don't have decent credit, the annual percentage interest can be something like 90%. The example shown was an $8500 dollar loan that over three years would incur $15,000 in interest.
The problem is, if someone needs money from strangers that urgently and doesn't have the credit rating to cover a more conventional loan, that person tends to be, shall we say, under-skilled at financial management. In fact, I would go as far as to say they could foreseeably "forget" to read contracts with 90% APRs in black and white and large letters.
I don't know what "predatory lending" is, technically; I would think it's some statutory term. But in a dictionary sense, it seems these kinds of loans are definitely predatory on people who most likely don't understand loans. That said, the upside is that the number of these kinds of loans can't possibly be very high considering that most people won't hold valuable cars free and clear if they don't understand money. In any case, I found myself with little sympathy for the lady who screwed herself over by agreeing to the loan based on her Cadillac Escalade she received as a gift from a relative who paid CASH for it. Come to think of it, has she paid her gift tax on that Caddy?! Someone call the Board of Equalization.
And yes, I'm being uncharacteristically vindictive in this post, but I was uncharacteristically annoyed by the stupidity being fostered by the story.
