Arizona residents are finding auto title loans even more pernicious than
payday loans, which were banned in the state more than a year ago.
Jean-Ann Fox of the Consumer Federation of America, an organization that
helped outlaw payday lenders, says that even though the 400 percent
interest rates that came with payday loans have been banished, auto
title lenders can still charge up to 204 percent interest while also
putting one of a borrower's most valuable assets in jeopardy. "So,
consumers pay a long time before they eventually default on loans and
can lose their vehicle," Fox notes. Phoenix residents Joshua Hernandez
and his wife Vanessa learned that the hard way when they took out a $663
payday loan with an interest rate of 180 percent. It took the couple
eight months and $1,200 to finally retire their loan. But the amount
they repaid is nearly double what they borrowed. "I caution anybody who
tried to do the same thing that we did," Vanessa said. "It's just a
warning don't do it!"