Title loans are nasty little things that can bring you to the precipice of financial ruin quickly and easily.
When you need money in an emergency, you can take your vehicle title to a title lender and hand it over for some cash. If you don’t pay back the money, the lender can repossess your car and sell it. The catch is that the monthly interest rate on title loans is astronomically high.
You think a 25 percent annual interest rate on a credit card is high? Try 25 percent a month for a title loan, which is equal to 300 percent APR. That’s what the average title lender charges.
A $1,000 title loan will cost you $1,250 after 30 days. If you have to roll over the principal and pay only the interest for a few months, you’ll pay $250 a month until the end of the new term, at which time you’ll still owe $1,250, which is the principal plus that last month of interest.
Georgia: Where the Government Hates You if You’re Poor
If title loans are the devil, title loans in Georgia are the devil’s stinky excrement. See, Georgia hates poor people, and so they allow title loans to be governed by pawn laws. And what that means is that the state with the sixth highest poverty rate in the nation happily throws its poor to the lions when they need money. Don’t wanna tread on the toes of a business that’s trying to make a little dough, and the title loan industry’s $3.6 billion annual profits makes it a demigod to Georgia’s sad little money-worshipping lawmakers, who certainly don’t want to hurt anyone’$ feeling$.
Title loans are illegal in 30 states because they’re predatory loans, meaning they prey on the poor in a number of ways. These are short-term loans – usually 30 days – but most people can’t pay back the loan plus the outrageous interest payment in a mere month. So they pay just the interest and roll over the loan’s principal to the next month.
The average title loan borrower rolls over the loan eight times, which means that a $1,000 loan at a 25 percent monthly interest rate will end up with a price tag of $3,000. When a family on minimum wage is trying to pay rent plus utilities plus food plus everything else, $3,000 in eight months is a huge deal. But Georgia doesn’t give a toot – if they did, the state’s minimum wage wouldn’t still be set at $5.15 an hour. FIVE FIFTEEN AN HOUR! In 2015! Shame on you, Georgia, you slimy bastard.
Anyway, I digress. We were discussing why Georgia is one of the worst states to live in if you’re poor, and why it’s even worse if you’re poor and need to take out a title loan. The only pro-consumer regulation on title loans in Georgia is the one that limits the interest rate to 25 percent a month for three months (which is standard anyway) and 12.5 percent after that (which generally means that pawn shops probably aren’t going to extend your loan past 90 days since they’ll make more money repossessing and selling your car.)
Georgia: At Least They Make Title Lenders Tell You In Writing How Badly They’re Gonna Screw You
I’ll let these two required disclosures for title loan paperwork speak for themselves.
“This is a pawn transaction. Failure to make your payments as described in this document can result in the loss of the pawned item. The pawnbroker can sell or keep the item if you have not made all payments by the specified maturity date.” In other words, if you hand over the title on your $5,000 car for a $500 loan to pay your overdue electric bill and you default on the loan, the pawnbroker can repossess your car, sell it, take out the last $125 payment you just couldn’t swing right then, and pocket the remaining $4,875. Because the majority of Georgia lawmakers blow.
“Failure to make your payments as described in this document can result in the loss of your motor vehicle. The pawnbroker can also charge you certain fees if he or she actually repossesses the vehicle.” In other words, title lenders in Georgia are perfectly welcome to pour salt on your wounds. They can charge you up to $250 to repossess your car and $5 a day to store it, and they can slap a handling fee on top of that.
Georgia: Promoting Thievery in the Night
Some states require that a title lender give you ample warning that your car is about to be repossessed, and some even require the lender to give you the opportunity to turn your car over to them at your convenience so that you can get your stuff out of it and make other transportation arrangements. But not in Georgia. In Georgia, if your loan payment is due on the first of the month and you don’t pay it, the lender can swoop in the very next day and take your vehicle.
After your car is repossessed, you have a 30-day grace period during which you can scramble for the funds to get your car back before it’s sold. But by then, the repo, storage, and handling fees can add up to an additional $400.
Georgia Watch: Possible Legislation to Protect Georgians from “Car Title” Loans
I came across an article from Georgia Watch, Georgia’s leading consumer advocacy organization, focused on issues that impact your wallet and your quality of life. The article was a call for support for the legislation, asking car title lenders to be moved to the state Department of Banking and Finance, and subject them to a 36% usury cap and additional consumer protections.
They call out how car title lenders prey on financially insecure consumers by offering high-interest quick cash loans that will eventually trap borrowers in a cycle of debt.
Currently, Georgia law allows small consumer loans at a max interest rate of 60% per year. However, as mentioned, there are legal loopholes that allow car titles to be “pawned” at interest rates as high as 300%.
According to Georgia Watch, to protect Georgians during this financially unstable time, the legislature should close all these legal loopholes to ensure that the borrowed amount is treated as a “loan” rather than a “pawn”. They ask for title lending to comply with current small-dollar loan industry standards.
They also want to cap interest rates on car title loans at 36% APR, and they want this to include every Georgian. This includes veterans and not just those who are actively serving the military.
Lastly, they want a level playing field for Georgians, calling out for uniformity to title loans across the state.
Unfortunately, there was no bill related to Title Pawns that was introduced during the 2021 Legislative Session. But hopefully, we will see this law implemented in the future since it has already been brought up.
Alternatives to Title Loans in Georgia
Seriously, if you live tiny paycheck to tiny paycheck in Georgia, stay far away from title loans. The state has no interest in protecting its vulnerable citizens against predatory lending, and in the name of commerce, they’ll let a predatory lender sell your car and keep what they’re not ethically, morally, or practically entitled to keep.
So look first for other cash options in an emergency. Borrow money from family or friends. Call around to credit unions, who may offer small dollar, short-term loans for poor credit at a fraction of the interest rate charged by a title lender.
If you absolutely have to take out a title loan, get the smallest possible amount and make sure you have a plan for paying it back. Otherwise, you’ll lose your car and every penny of equity you have in it, and Georgia will blame you, because, damn, stop being lazy and get a third job!