5 Scams that Ruined the Black Community

2. Pay Day Loans – I know we all trusted Montel Williams in the 90s and want desperately to believe that he could do us no wrong, but those commercials assuring that pay day loans are the most trust worthy way to handle emergencies are a death sentence waiting to happen! Why would it ever make sense for someone who earns $800 per month to be eligible to borrow $1500? So when you’re paying off this $1500 in 30 days how are you supposed to survive in the mean time? Once you give them all of your next paycheck, not only will you still have a balance, but you will incur additional interest, penalties and fees daily while still having your normal expenses to worry about. Is that really peace of mind?

3. Title Pawn Loans – I’m not sure how long the title pawn business has been around, but my have we allowed them to blow up substantially since this recession. These businesses have taken root in every urban shopping center across the country. But do we even realize that car title loan companies are known for having interest rates that would make a loan shark blush? While the average interest rate on a so-so credit card may be in the mid to high teens, the APR on title loans can reach triple digits. A past client of mine had an agreement which showed a 250% APR. (Don’t see the monthly APR of 20% and think you’re ahead of the game. Look at the total life of the loan to get realistic numbers.)

In addition to high interest, these car title loans usually include a number of “mandatory” fees that add up quickly. They include processing fees, document fees, late fees, origination fees and lien fees. The cost of all these fees can be anywhere from $80 to $115, even for just a $500 loan. I once read a report that shared one woman’s horror story. She paid $400 a month for seven months on an interest-only payment term for a $3,000 loan. After paying $2,800 in interest, she still owed nearly $3,000 in the eighth month.

If you find yourself contemplating a car title loan, check out these alternative options and read the information for yourself at http://www.responsiblelending.org  or http://www.consumerfed.org

Leave a Reply

Your email address will not be published. Required fields are marked *