Quick Cash Loans Could Increase Your Debt

HOUSTON - For many consumers with credit problems, short-term payday loan or car title loans can be tempting. But getting that quick cash often drives the borrower further into debt.

That's what happened to Janel McBeth.

Mc Beth is a single mother of two teenagers, one of whom has severe health problems.

When she signed a loan promising to pay the equivalent 300 percent interest, her life got a lot tougher.

Like any caring parent, McBeth wanted her kids to have necessary items for school. But she didn't have the money. So she took out a car title loan from Speedy Cash.

A car title loan is a high-interest loan targeted to those with little or no credit; those whose need money quickly. Under a title loan, the lender keeps the car title until consumer pays them back.

Speedy Cash loaned McBeth $996. In addition to turning over her title, she agreed to pay Speedy Cash $257 a month until she could repay the full $996. That amounted to an annual percentage rate of 314 percent!

When McBeth missed a payment she made arrangements with Speedy Cash to pay by Oct. 30.

But, two days before that Oct. 30 deadline, Speedy Cash repossessed her car.

" I started to panic because I thought I could never get my car back," Mc Beth said.

Her debt then began to mount. In addition to the original $996 she owed Speedy Cash an additional $320.

She had to pay the repo company $855 and the auction house another $150. She got her car back, but the tow truck had punctured the oil pan and the car was not drivable.

Mc Beth then paid another $955 to get it fixed.

After all her expenses....Janelle had dolled out $2,280 to borrow just $996. Now she was really broke.

"We're up for eviction because I don't have the money for the rent."

Attorney Rich Tomlinson has read hundreds of title and payday loan contracts. He says they're legal but he doesn't like them.

"These kind of loans are not a public service. They make life worse for people," Tomlinson said.

Tomlinson said when a consumer takes out a payday or title loan, that person often gets further into debt.

"Most people cannot pay off the loan. They can't pay it off at the end of the term. So they have to get a new loan to pay off the previous loan and then they do this repeatedly."

Mc Beth admitted, "I've just gotten like in this financial spiral that I can't seem to get out of."

Determined to get her out it, Emily Akin called Speedy Cash.

Bill Baker, Vice President of Marketing and Business Development said title loans are often necessary because they are " much less expensive than having the electricity shut off or bouncing a check."

Akin pointed out McBeth had a very bad experience.

Speedy Cash agreed and released Janel from the loan giving her back her title.

Now McBeth is looking at other ways to handle her finances besides short term, high interest loans.