>
>Like a car equity loan? Now that would be an interesting financial
>product, given how rapidly the things depreciate.
"car equity" brings up a lot of hits on Google. This is the first one.
>Strapped for cash, James Haga of Marion, Va., took out a $1,600 loan
>last year, using his truck as collateral. In August, when he
>couldn't keep up with the escalating balance, Haga's Ford was repossessed.
>[]
>
>[]
>
>Total cost for the loan? A $13,000 auto, plus $4,500 in payments.
>
>"I was at home in the shower getting ready to go to work, and I went
>out to get my truck and it was gone," said Haga, 44, whose loan
>carried an effective 300 percent annual interest rate. Adding to his
>worries, Haga's girlfriend, Brandy Smith, 31, is carrying a similar $700 loan.
>
>Haga is one of thousands of consumers who have turned to auto title
>lenders for quick cash and ended up with big problems. Under the
>loans, sometimes called auto equity lines of credit or auto pawns,
>individuals offer fully owned cars or trucks as backing for loans of
>several hundred to several thousand dollars. Lenders take the title
>to the vehicle and, often, a duplicate set of keys.
>
>Title lending is one of the lesser-known, high-cost loans now
>proliferating across the country. But consumer advocates call it one
>of the more dangerous.
>If borrowers can't pay back the loans, often due in 30 days, they
>often roll them over, with multiplying fees. If they still fall
>behind, their cars can be repossessed. That contributes to a
>downward spiral, with people unable to get to work, a doctor or
>drive their kids to school.
>
>Rod Aycox, president of LoanMax auto title and its affiliated
>companies throughout the country, made about half a million loans
>this year and repossessed cars in 5 percent of the cases, or 25,000
>autos, according to a statement from his firm. The average age of
>cars offered as collateral was 10 to 12 years.
>
>Lenders like LoanMax are lobbying state legislatures to ward off
>what they call overly stringent laws, saying they provide a needed
>service for people who can't get financing elsewhere and comply with
>consumer finance laws where they operate.
>
>Some hasten to add that many borrowers don't fit the profile of the
>down-and-out desperate willing to sign anything.
>
>"You'd be very surprised," said Shane Edrington, president of
>PrePaid Motors, an Internet-only lender in Scottsdale, Ariz. He
>mentions a recent customer who offered a paid-off $40,000 luxury car
>as security for a $3,000 loan.
>
>Auto title lending is part of a huge expansion of the alternative
>financial system since the 1990s, including payday loans, high-cost
>mortgage products and check-cashing firms.
>
>New law enacts 36% cap
>
>President Bush earlier this year signed a law that will place a 36
>percent annual cap on payday and other high-cost lending to the
>military. Under payday loans, consumers offer a post-dated check in
>return for a short-term loan with annual fees of often 300 percent or more.
>
>Consumer advocates call that a start but say the protections need to
>be extended to all borrowers.
>Small loans are mainly regulated by states and local governments.
>Auto title lenders operate in about half of the 50 states, according
>to the Consumer Federation of America.
>
>A few states, including Florida and Kentucky, have clamped down on
>the practice, according to Jean Ann Fox of the CFA. In Illinois,
>Utah, Iowa, Kansas and Virginia, lenders are acting with effectively
>no restraints on rates, she said.
>
>Aycox, in a statement through his firm, said artificially capping
>interest rates at even a higher 36 percent would "force our company
>out of the business and thereby eliminate a needed credit option for
>hundreds of thousands of consumers."
http://www.indystar.com/apps/pbcs.dll/article?AID=/20070101/BUSINESS/701010387