Last summer, Amber and Jason bought a new home for their family in Rantoul, Illinois. During their first weekend in their new home, the water main broke. Though they had paychecks coming in, they didn’t have enough money to cover the cost of the repairs.
Needing to keep the water on for their family, they sought out an auto title lender, who told them, “You can take out a loan right now, no problem.” They took out a loan for $500, and started making monthly payments of about $86. Looking back, Jason states, “I was under the impression when we started that as we paid that $86 per month, it would come off the $500 that we got.”
When Jason checked on the principal balance after paying for a couple of months, however, he found the balance was $498 – only $2 had gone toward the principal and the APR on the loan was 200 percent. Living paycheck to paycheck and trying to pay off the loan, Jason and Amber actively worked with the lender to change the payment plan, change the payment date, and make adjustments to the loan. But, as Jason shares,
“I couldn’t move the payment date. I couldn’t pay it early. There’s no lee-way. There’s nothing. It’s either that or they take the only vehicle I’ve got.”
The $86 a month inflexible payment affected their family in horrible ways – forcing them to choose between their vehicle and their health, or to delay paying other bills. Jason sacrificed an important post-operative appointment to make the loan payment one month.
One loan payment occurred the day before Amber gave birth to twins. With all the extra money going towards the loan, Jason was left with no money for gas and was unable to visit Amber and his newborns in the hospital.
After 13 months of making $86 payments – a total of about $1,118 – Salt and Light Ministry helped Amber and Jason find the money to pay off the loan entirely. When they went to pay off the loan, they owed $559, of which $463 went to the principal. After making more than $1,000 in payments, they had only made $37 of progress on the principal. Had they continued with their two-year payment plan, they would have paid a total of $2050.80, more than four times the amount of the loan.
This story is part of No Right Turn: Illinois’ Auto Title Loan Industry and its Impact on Consumers, a report we released with Woodstock Institute last week. Download the report to learn more about auto title lending in Illinois, and how it affects people like Jason and Amber.
To hear more, check out the recording of a webinar we hosted discussing the findings in the report.
You can use these tweets to spread the word:
IL title loans can accumulate $15 in interest per day. Stories in report: http://bit.ly/autotitleIL#StoptheDebtTrap @ILAssetBuilding @WoodstockInst
Title loans force ppl to make choices btwn their vehicle & health. http://bit.ly/autotitleIL#StoptheDebtTrap @ILAssetBuilding @WoodstockInst
Jason & Amber paid $1677 on $500 title loan. http://bit.ly/autotitleIL #StoptheDebtTrap @ILAssetBuilding @WoodstockInst