Paul lives with his two teenage daughters in the small town of Fairmount, Illinois. He has worked hard in the manufacturing industry for most of his life and is currently working for a small company that builds farm equipment. Paul never thought that he would take out an auto title loan, but his life took a turn for the worse this year.
In December of 2014, his wife of more than 20 years died of a heart attack after a year-long struggle with lung cancer. His life was shaken up.
The $8,000 in funeral costs and medical expenses put Paul into debt and strained his credit, but he kept working hard to stay afloat. After months of financial stress, Paul had a heart attack of his own in March 2015, which forced him to be out of work for four weeks.
He was struggling to get by and support his daughters. By April, Paul felt like he had run out of options, and so he took out a $2,000 title loan to try to make ends meet and started making the monthly payments of $450.
Then in June, Paul was injured in an industrial accident that caused him to lose part of his fingers. When he received the settlement from the accident, he wanted to completely pay off his title loan. He called the loan company, and they explained that he was accumulating about $15 in interest per day. To pay it off in September, Paul paid $2,400. In total, he paid about $4,200 for the $2,000 loan â€“ a much lower amount than he would have paid if he had not paid off the loan early.
Paul was aware of the dangers of these types of loans. He knows other people who took out title loans and had their cars repossessed when they defaulted. He stated, “I always swore I would never take out a title loan, but I was in a bind.” High-cost title loans take advantage of consumers’ vulnerability and tendency to have “tunnel vision” in times of financial stress. Fortunately, Paul is starting fresh. He works with the Money Mentors program at the University of Illinois Extension, he has a budget, and he’s debt-free and determined to keep himself that way.
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 this week. Download the report to learn more about auto title lending in Illinois, and how it affects people like Paul.
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Stories of title loans stripping wealth from IL families in report: http://bit.ly/autotitleIL#StoptheDebtTrap @ILAssetBuilding @WoodstockInst
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