Budget Blogger

You’ve worked hard to get your finances in order and have a clear car title as proof, but convincing a traditional bank or credit card company to lend you money isn’t easy.  It may take years for your credit history to recover from a rough patch.  Until loan approvals are the norm instead of the once in a blue moon scenario, car title  or auto pawn loans are an alternative to traditional lenders. 

One of the benefits to owning a car that’s paid for is you have easy access to quick cash no matter what your credit history looks like.  In fact, pink slip loans were created to help people with bad credit ratings or less than stellar payment histories. 

Title loans let you continue to use your car during the repayment period.  Applying for an auto title loan is easy.  You can call, apply on line, or go directly to a title lender’s office.  You’ll need to provide proof of income, the title to your car to establish ownership, proof of insurance, identification, proof of residence, references, and you’re banking history.

It’s that easy. Walk in with your paperwork and usually, within 24 hours, you’ve got the quick cash you need.

No matter what type of loan you’re looking for, it’s easy to get caught up in media advertising and Internet pop-ups promising to deliver the best loan rate on the market today.  Bank, auto pawn, payday advance, or even using a new or existing credit card  are just a few of the options available to consumers today.  One important thing to keep in mind is that for many types of loans, it’s best to choose a company that truly provides one-stop service.

It’s hard to tell the difference.  A loan broker’s storefront or Web site may look exactly like any other payday loan company you borrow from, but the broker is actually selling your application to a lender.   These lenders may have limited or even no storefronts or Web sites.  They rely on payday loan brokers to represent their products. The company pays the loan broker a fee or commissions for your business.

These are “back-alley” brokers that exist specifically to gather your personal information and then sell that information to the lender willing to pay the highest amount of money for your paycheck advance, title loan, or payday loan application.  Mortgage loan brokers and credit card brokers are out there too.

While the internet offers a quick and easy way to get access to payday and title loans, it’s really important to make sure that the company you’re giving your personal information to is reputable.  Make sure that the bank or lender you’re applying to is the same company that will ultimately be funding your loan.  That’s the best way to limit the chance that your personal information will be resold.

Also, make sure the payday or auto title lender you are borrowing from adheres to standards established by the Community Financial Services Association of America — an organization dedicated to ensuring that payday loan customers have access to companies offering safe and responsible lending practices. 

If you’ve tried conventional loans or have been turned down for credit, you may choose to use an auto title loan for extra cash in an emergency.   If you do, here are a few things to keep in mind:

- You need to have a clear title to the car

- The amount of your loan is based, in part, on the value of your car

- Some auto title lenders may require proof of insurance, so talk about this up front

- As with payday advances, title loans are intended for short term use

- Pay careful attention to your repayment date and stick to it –  make this loan a priority

- To help expediate the process, have references, employment and bank information available

Sometimes what seems like a bad idea to everyone else, isn’t really what it seems.  And sometimes — depending on the spin associated with this idea — what’s bad suddenly becomes good.  Take title loans — depending on who you talk to they can be a great way to use the equity in your car to pay for unexpected bills, or if you listen to the media , a title loan is the loan product that drives you into financial ruin.

When I was younger, I took out a used car loan from my bank.  The car was paid for, and I was carrying a big balance on my only credit card.  Life just always seemed to get in the way of me making the payments I planned to make every month, so this was my way of tackling the debt.

The bank called it a used car loan, but it was really a title loan.  I wasn’t trapping myself in a cycle of debt, I was getting out from under a credit card balance that I just couldn’t get under control.  Some people use the equity in their cars to help them out in a financial emergency, and others use it like me, for a little self-imposed discipline.

Paying off the loan felt great.  Good or bad, I really liked having an alternative to that tempting line of credit on my Visa.

It happened – I heard the first Christmas song of the year on the radio yesterday.  I changed the station, because this year the thought of spending money on anything that’s not a necessity doesn’t exactly fill me with joy and goodwill. 

If the holidays seem far away, and you’re struggling with the need for quick cash, remember these guidelines if you’ve decided an emergency payday or title loan is right for you:

• Shop around for the best rates and fees
• Use only reputable on-line lenders  – verify that the payday loan company you use is funding your loan, not brokering your application
• Borrow only as much as you know you can repay with your next paycheck
• Give your payday loan first priority when paying your bills

Last week I filled out an application for a home equity credit line.  The loan officer said she could only offer me an average interest rate even though their advertisements promote prime minus half a percentage point. “It’s an adjustable rate.  You’ll pay whatever the prime rate is at the beginning of the month,” she said.  “You need to have A+ credit to get the better rate.”   I have an “A” credit rating, but still felt like I’d failed a test. 

Here’s how the rest of the credit scoring system goes:

Low Risk (726 - 830):  The land of high credit scores where it’s easier to get a loan and you can save money by negotiating a lower interest rate or a better term on a new loan or credit card.

Low - Medium Risk (700 - 725): The land of good credit scores where lenders might want to extend credit and it’s possible to get better-than-average rates and terms on new loans and credit cards.

Medium Risk (626 - 699): The land of average credit scores where lenders might lend you money, but you may only get average rates and terms.  It’s like a “C” on your report card — if only you had tried harder.

Medium - High Risk (551 - 625): The land of below average credit scores where lenders need to be convinced you can be trusted with their money.  This one’s like explaining to your parents why they should pay for another semester of college if you’re GPA has headed south. In this range, it’s not likely you’ll get a great interest rate.

High Risk (330 - 550): The land of bad credit where lenders need a reason to lend you money -  like tons of equity in your home or car or someone with stellar credit to cosign your loan.  If you do get approved for a loan you’ll pay higher rates regardless of the reason your credit score is low.

The Payday Pundit blog summed up the You Tube video I posted  yesterday with this quote:  “There won’t be any need for short-term credit, Barack Obama is going to provide for everyone.”

That’s good news for consumers using payday loans in Ohio.  They’ll need Obama’s help to get quick cash in a financial bind as payday loan companies are forced to close their doors in part because of House Bill 545 -  a law reducing the fee charged on a $100 two-week loan to $1.08 from $15.

You can still find  reputable on-line lenders  – but in Ohio, as lenders are forced out of business,  finding a payday or title loan lender just won’t be the same.

This You Tube clip was played on the radio a bunch of times this morning, and I found it on another blog.  Without getting into a discussion about who I voted for and why — the one thing I can’t help thinking about is maybe it’s time we start taking responsibilty for our own financial matters.  

Peggy Joseph: “It was the most memorable time of my life. It was a touching moment. Because, I, I never thought this day would ever happen. I won’t have to worry about putting gas in my car, I won’t have to worry about paying my mortgage, you know, if I help him, he’s gonna help me.”

Here’s a twist to “every vote counts.”  How about every vote counts, and it’s even better if voters actually understand what they are voting for?

I have a friend who hosts a pre-voting day party every year – not just when we’re electing a new president.  She’s a little older than me, but has children the same age as mine, lives in my neighborhood, and has about 25 years of experience working with local and state governments and politicians.  I started attending her parties about 10 years ago — for the wine, free babysitting, and adult conversation. 

Little by little things changed, and now I actually go because I really want to understand what I’m voting for on a local and national level.  This year I was in New York when she had her party so I’m on my own trying to figure out who and what to vote for tomorrow. 

I found this Website http://ballotpedia.org/wiki/index.php/2008_ballot_measures#State-by-state_chart online, and it really helps, especially when there lots of topics receiving lots of media attention – like the payday loan interest rate cap referendum in Ohio.  Take a look at your state for detailed information.

Last week cardratings.com reported the average credit card interest rate rose to 13.81 from 13.75 two weeks ago.  Even after the Fed dropped its federal funds rate and discount rate, credit card customers aren’t seeing much benefit. Lending standards are tightening which leaves consumers with few choices to help in a financial emergency.  Credit card advances, payday loans and borrowing from family or friends are a few of the remaining choices, but payday lenders are faced with legislation that just might put them out of business and your family and friends might be reluctant to lend money in today’s economy — a definite incentive to take charge of your financial situation