Village News Commentary: Look at the home budget side of vehicle title-loans

Last week the Village News looked at the moral issue of vehicle-title lenders. This week let’s look at how it would affect you if you paid their interest rate on your purchases.

Question: Would you pay 220 percent interest on a new car? Then what’s going on when a lender charges 220 percent interest for a lien on your old car?

The lender that is seeking permission to locate at Osborne Road and Jefferson Davis Highway in the former 7-Eleven, LoanMax, is the type of lender we are using as an example.

A public hearing on whether they will be able to locate there is up for a vote at the Chesterfield Board of Supervisors meeting on August 28.

You walk into you favorite new car dealership, and on the way to the showroom you notice the prettiest little sedan, looks a little sporty, has room for the kids and navigation system with SiriusXM radio to boot. “Don’t know if I can afford it, but I’m going to give it a shot,” you say to yourself.

A salesman meets you at the door, introduces himself; you take the test drive and before you know it you’re sitting in the finance office. As you wait, you notice the poster on the wall, “No credit check, your word is good enough for us.”

The finance clerk clicks some keys and out comes a finance contract. You immediately notice the price of the car at the top, $20,000. “I can do that; monthly payment shouldn’t break the budget.”

The finance assistant slide the contract across the desk and you see the details as she begins to read them to you.

“Your pretty little car, and it is nice isn’t it, will cost you, after your negotiation with the manager, $20,000. Our deal this month is ‘no money down’.  So here is what we have come up with,” she says.

“Great.”

“Financed over six years, your payment would be $3,666.69.”

“That’s three times my house payment, are you kidding me?”

“No sir, let me finish. Your interest over six years on your 220 percent loan would be $244,001.44 for a total of $264,001.44. Now if you want to go to seven years… click, click, click… your payment would actually be a little more and you would pay $288,000.22. I think you should stick the six-year plan don’t you.”

“Who’s your finance company?”

“They’re right up the road and they’re a legitimate vehicle-title loan company. So you’re safe. They’re not predatory lenders if that’s what you think.”

“What I think is I’m going somewhere else.”

“It’s not so bad sir, you can miss two payments before they repossess your car.”

Maybe that’s a little extreme, so let’s say you need a couple extra bucks because your health insurance didn’t pay a 100 percent to take that corn off your toe. I’ll stop at the LoanMax and get the money I need to get that cornologist off my back.

One Thousand dollars over a one year period would require a payment 211.37 a month; a year of interest $1,536.47; total repay to lender 2,536.47. Maybe a payment plan with the cornologist may have been safer. Just over $200 a month over five months beats losing your car.

The preceding is intended inform and is not meant to to harm any one business. The 220 percent interest rate is the highest allowed by the State of Virginia. Most vehicle loan companies, according to the Poverty Law Center, charge a rate as close to the limit as possible.

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