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 the path to healthy credit and financial success.
The program is called “Lend a Hand” and is offered through a partnership between the Arizona Community Foundation, MariSol Federal Credit Union, Phoenix IDA and Take Charge America.
According to the Consumer Federation of America, Arizona is the seventh most concentrated title lending market in the nation. In its report, “Wrong Way: Wrecked by Debt,” the Federation also states that one in six borrowers in Arizona had to repossess their car and associated fees, which averaged half of the company‘s outstanding debt. ‘borrower.
“Individuals in our community face what is called a debt trap. They are caught in a vicious circle of exorbitant interest rates, excessive fees and unrealistic loan terms,” said Juan Salgado, executive director of Phoenix IDA. “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 borrowers can download an application and view eligibility requirements at http://www.takechargeamerica.org/lendahand/.
- Once the application is 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 reimburse up to $2,000 of the outstanding title loan for qualified applicants. MariSol will then convert the repaid amount into a new low-interest loan with better repayment terms for borrowers. MariSol will also help borrowers establish a savings account to fund future emergencies, requiring an initial savings deposit of $25 plus additional savings deposits of $10 for each month of the loan.
“The Lend a Hand loan program offers applicants favorable loan terms at no cost that will make sense for their budget,” explained Robin Romano, general manager of MariSol Federal Credit Union. “Approved borrowers will also become members of our credit union and enjoy the benefits and stability it offers,” Romano said.
According to a 2015 study by Pew Charitable Trusts, more than 2 million people, or about 1% of American adults each year, use high-interest auto loans and borrow against their cars.
“Studies prove what we already see when we drive down certain streets in Phoenix. Car title lending companies are concentrated in financially vulnerable communities,” said Elisa de la Vara, community manager at the Arizona Community Foundation. “Until Arizona policymakers act to further limit this industry, as they have done with payday lenders, this program provides a better option for residents who are struggling to pay their loans on car title,” de la Vara explained.
Take Charge America, a national nonprofit credit counseling agency headquartered in Phoenix, helps with the financial education component. “Our role is to focus on the long-term financial health of each candidate. As soon as you contact us, we’ll offer you a free credit counseling session, a thorough review of your credit report, and help you budget,” said David Richardson, CEO of Take Charge America. “Our goal is to provide the financial knowledge and resources needed to help borrowers avoid costly loan traps in the future,” Richardson added.
If you’re having trouble repaying a car title loan and you 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.