Financial desperation sometimes leads people to the “fringe banking” industry for a short-term cash advance at a very high interest rate. This may take the form of a “payday loan,” a loan in anticipation of a refund, or a pawn transaction involving your motor vehicle’s title.
The working poor are the main customers of these “sub-prime” lenders. In Georgia, the interest rate such companies are allowed to charge is capped by law at 25 percent monthly (300 percent annually) for the first three months and 12.5 percent monthly after that (150 percent annually). This means a combined maximum yearly interest rate of 187.5 percent.
In the case of title pawns, state law [O.C.G.A. Section 44-12-138(b)(3)] requires the pawnbroker to provide you the following written statement when you pawn your vehicle: Failure to make your payment as described in this document can result in the loss of your motor vehicle. The pawnbroker can also charge you certain fees if he or she actually repossesses the vehicle.
If you have had dealings with a lender you believe has violated any of these requirements, you should notify the local criminal authorities for the city or county in which the title pawn company is doing business.
If your financial situation has you thinking about contacting a sub-prime lender, first bear in mind these recommendations:
- Shop wisely among the offerings in the marketplace.
- Look for the lowest interest rate from a bank or credit union.
- Consider a loan from family or friends.
- Ask your present creditors about reducing your interest rate.
- Maintain a bank account with overdraft protection for some degree of security.
- Make a budget.
- If you need help with a budget or see no way to pay your bills, consult a legitimate consumer credit counseling service.