Four community-focused organizations are launching a program to rescue Maricopa County residents struggling to pay off high cost title loans and help put them on a path to healthy credit and financial success.
The program is called “Lend a Hand,” and is being offered through a partnership between the Arizona Community Foundation, MariSol Federal Credit Union, the Phoenix IDA, and Take Charge America.
According to the Consumer Federation of America, Arizona is the seventh most concentrated title loan market in the country. In its report, “Wrong Way: Wrecked by Debt,” the Federation also states that one in six title loan borrowers in Arizona faced repossession of their car and associated fees averaging half of the borrower’s outstanding loan debt.
“Individuals across our community are facing what is called a debt trap. They get caught in a vicious borrowing cycle of exorbitant interest rates, excessive fees, and unrealistic loan terms,” said Juan Salgado, Phoenix IDA executive director. “The Lend a Hand loan program is an alternative for those who need help paying off their loan to avoid losing their car, ruining their credit, or worse,” Salgado continued.
Here’s how the Lend a Hand program works:
- Interested title loan borrowers can download an application and review eligibility requirements at http://www.takechargeamerica.org/lendahand/.
- Once the application has been submitted, the borrower can schedule a free, confidential credit counseling session with Take Charge America to develop a budget and create an action plan to eliminate debt and save for the future.
- MariSol Federal Credit Union will review the application for eligibility, and pay off up to $2,000 of the outstanding title loan for qualified applicants. MariSol will then convert the amount paid off into a new lower-interest loan with better repayment terms for borrowers. MariSol will also help borrowers establish a savings account to fund future emergencies, by requiring an initial savings deposit of $25 plus additional $10 savings deposits for every month of the loan.
“The Lend a Hand loan program offers applicants favorable loan terms with zero fees that will make sense for their budgets,” explained Robin Romano, chief executive officer of MariSol Federal Credit Union. “Approved borrowers will also gain membership to our credit union and enjoy the benefits and stability that offers,” stated Romano.
According to a study by the Pew Charitable Trusts in 2015, more than 2 million people, or approximately 1 percent of American adults annually, use high-interest automobile title loans and borrow against their cars.
“Studies prove what we already observe as we drive down some Phoenix streets. Car title loan companies are concentrated in financially vulnerable communities,” said Elisa de la Vara, chief community officer at the Arizona Community Foundation. “Until Arizona’s policy makers act to further limit this industry, as they did with payday lenders, this program offers a better option for residents who are struggling to pay their car title loans,” explained de la Vara.
Take Charge America, a national nonprofit credit counseling agency headquartered in Phoenix, is assisting with the financial education component. “Our role is to focus on each applicant’s long-term financial health. As soon as you contact us, we will provide a free credit counseling session, a thorough review of your credit report, and help you build a budget,” said David Richardson, chief executive officer of Take Charge America. “We aim to provide the financial knowledge and resources to help borrowers avoid any costly lending traps in the future,” added Richardson.
If you are struggling to pay off a car title loan and live in Maricopa County, call 1-877-822-2410 or visit http://www.takechargeamerica.org/lendahand/. The Lend a Hand loan program will be offered for a limited time while funding is available.