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title loanArticle from the New York Times titled Rise in Loans Linked to Cars is Hurting Poor.  “When Tiffany Capone suggested that her fiancé, Michael, take out a $10,000 title loan from TitleMax, with a 119 percent interest rate, she figured it would be a temporary fix to pay the bills. But this summer, after Michael fell behind on the loan payments, the couple’s three-year-old Hyundai was repossessed.

“It had my child’s car seat in the back,” said Ms. Capone, of Olney, Md.

With their car gone, the couple had to sell most of their furniture and other belongings to a pawnshop so they could afford to pay for taxis to ferry Michael, a diabetic with a heart condition, to his frequent doctors’ appointments.

The hardships caused by title loans are being cited as one of the big challenges facing poor and minority communities.

Title loans are “a form of indenture,” said Robert Swearingen, a lawyer with Legal Services of Eastern Missouri, adding that “because of the threat of repossession, they can string you along for the rest of your life.”

A review by The New York Times of more than three dozen loan agreements found that after factoring in various fees, the effective interest rates ranged from nearly 80 percent to over 500 percent. While some loans come with terms of 30 days, many borrowers, unable to pay the full loan and interest payments, say that they are forced to renew the loans at the end of each month, incurring a new round of fees.

Note from Diane – how can I reach those who really need this information?  The lenders prey on the naive poor knowing that they see little other options but to take high interest loans.  My suggestion – look at the consequences of  these actions before stepping into trouble.  Now don’t say that I “could not possibly understand your financial challenges”.  I have been out of work and wondering how I was going to feed my family.  I pawned family possessions in order to pay the utilities.   We were on the verge of losing our home to foreclosure.  Therefore, I know it is hard to look to the future when you are struggling to keep above your bills, but you have to.  Otherwise this will become a never ending circle.  Educate yourself about your financial options.   Trust your gut.

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Diane L. Drain

Diane L. Drain, bankruptcy attorney, retired law professor, mentor and community spokesperson.

About Diane Drain:

Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.

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