It goes beyond just getting from point 'A' to point 'B.' A vehicle acts as a lifeline to work, school, doctor appointments, and more. For many people living in Arizona, a vehicle is essential, but it might not be affordable.
Let ABC15 Know viewer Stephen says when his Jeep had a transmission problem, he had to take it to a shop. However, being without a car created other issues.
"I was just trying to get my vehicle back because I was trying to get back to work," Stephen explained.
The repair was not cheap. Stephen financed $2,818 through the repair company to afford the new transmission. As part of the contract, the annual percentage rate for the loan was nearly 180%! But, without other financing options and in need of a vehicle, he signed.
"It's ridiculous," Stephen said, voicing his frustration. "There should be a cap for how much they can charge an interest."
In Arizona, there is no law limiting auto loan interest rates, but there is a law capping title loan rates.
By law, title loans have limits on the monthly interest rate that can be charged depending on the price of the loan.
Let ABC15 Know viewer Jaylyn shared their title loan document. They financed $2,500 and their APR was a whopping 153%. While a high number, it's within the legal monthly percentage limit. At the 153% rate, Jaylyn would pay more than $12,000 to clear the loan.
Companies fronting the loans do take on risk, but consumers like Stephen question if such large percentage rates add extra hardship on consumers without many financial options.
"I ended up going through and selling things that I had so I could pay off this one particular loan," Stephen explained.
The Arizona Department of Insurance and Financial Institutions has the following tips for consumers:
- Make sure you understand how title loans work and how the interest is calculated
- Ask questions if anything is unclear
- Compare interest rates between lenders
- Never sign a contract before reading it
- If you are not able to make a payment when it is due, contact the lender to make payment arrangements
- If you have a problem with a Title Lender, file a complaint with DIFI
