The American economy is in free-fall right now as the novel coronavirus, COVID-19, has upended years and years of amazing economic growth.
Americans all over the nation are feeling the crunch in different ways, but all of them are feeling it. We are watching as small businesses, in particular, are stressed and overloaded, employees are losing jobs left and right, and government programs designed to feed cash back into the economy – all to stem the tide and stop the bleeding – are not having as much of an impact as many would have hoped it would.
Not all is doom and gloom, though.
There are programs available – particularly in the nontraditional and alternative financing world – to help people push back against the coronavirus crunch, to help them get through these tough economic times, and to provide them with an opportunity to come out on the other side of this crisis with a brighter financial future than they would have ever thought possible.
Let’s dig into those details below.
The Astounding Number of Jobs Lost
While there is a lot of conflicting data out there regarding the virus itself as well as the economic impact it’s going to have, almost all economists and financial experts agree that COVID-19 has made a recession almost a certainty.
According to information from the US Bureau of Labor Statistics, the country lost 20.5 million jobs in April alone. May is almost over and experts believe that another 10 million+ jobs have been lost, and though the nation is beginning to slowly reopen throughout June or July, August may bring additional record-setting unemployment rates.
Just to put that in perspective, 30 million people in the US without jobs would represent nearly 1 out of every 10 people losing their career because of the coronavirus.
While the overwhelming majority of coronavirus cases and coronavirus related deaths are coming out of states like New York (which has been particularly devastated), most states from coast to coast have shut down their local economies.
We recognize that government leaders had to shut things down to flatten the curve, to protect people, and to keep people safe. But what happens when we lose our jobs, lose our financial freedom, and lose the ability to provide for our loved ones – with no end in sight – while doing so?
Interestingly enough, we aren’t only seeing small businesses hit hard by this decision to shut down. Some of the biggest companies on the planet are feeling the crunch. Large corporations everywhere are furloughing employees, outright terminating employees, and begging for bailouts from state and federal government organizations.
We have already seen many companies – major companies – go belly up during the coronavirus meltdown. JCPenney and Hertz, two large rental car companies, are just recent examples of major national corporations that may never come back because of this economic downturn.
Citizens Struggling To File for Unemployment
Making things worse is the fact that while record numbers of Americans are losing their jobs and applying for unemployment, many of them are having a difficult time even getting approved for this financial protection.
The US Bureau of Labor Statistics reported more than 3 million Americans filing for unemployment every week since the beginning of April. And while the rate has been trending down a little bit of late (3.17 million Americans filing for the week ending May 2 compared to 3.85 million Americans filing for the week ending April 25), we are still looking at a huge influx in unemployment requests that aren’t going to stop anytime soon.
Problems have only been compounded with the Coronavirus Aid Relief and Economic Security Act, also called the CARES Act, passed by the US government.
The Impact of the CARES Act
The third aid package of the CARES Act specifically was designed to help businesses and American citizens find relief during the coronavirus economic downturn. It had more than $2 trillion worth of funding designed to breathe life into our economy—with a significant amount of money set aside for unemployment benefits.
While $260 billion were added to the unemployment benefits pool, helping to provide $600 more per week on top of whatever unemployment benefits individuals were going to receive anyway, this money has started to dry up as this legislation only guaranteed an extra 13 weeks of benefits. Yet, those 13 weeks are almost up and the program has not yet been expanded.
These added benefits and the added protection have more and more people seeking unemployment, even as businesses throughout the country start to reopen. Some employees are reporting that they would rather continue with unemployment as they make more money thanks to the $600 extra a week the CARES Act provides—something that’s only going to slow down our economic recovery in the long haul.
And while local, state, and federal leaders continue to say that we are going to be able to bounce back from this economic collapse faster than anyone expects, the Congressional Budget Office (a nonpartisan governmental organization headquartered out of Washington DC) projects that we will continue to see high unemployment rates as a direct result of the coronavirus well into 2021.
Their projection has a 9% unemployment rate in the middle of 2021, regardless of what we do to stimulate the economy right now, which is anything but good news for people that are looking for a bit of financial security these days.
The Rise in Applications for Alternative Financing
To the surprise of absolutely no one, banks and traditional lenders are tightening their purse strings and cutting back on the loans available to consumers. This goes for small business loans as well.
Americans are finding it harder and harder to get credit these days, even though they need the money the most right now. Traditional lenders just aren’t interested in handing out a lot of loans considering the economic future of this nation is so uncertain in the short-term.
Major traditional lenders like J.P. Morgan Chase, Bank of America, and Capital One have been pulling back during the economic crisis.
A number of these organizations have been very transparent about the fact that they are restricting the loans and approvals for consumers with low credit scores. Also, they are asking for a lot more documentation regarding income and income stability.
On top of all that, you have companies like American Express openly stating that they are significantly scaling back the financing solutions they make available to small and medium-sized businesses. Financial technology companies and payment processors are similarly cutting back, with SQUARE and On Deck Capital both making moves to significantly restrict the amount of new business they get into as well during the coronavirus pandemic.
It’s easy to understand why traditional lenders are so gun shy about offering new loans during this time of economic uncertainty. They certainly don’t want to deal with a repeat of the Great Recession that occurred in the middle 2000s.
On the flip side of things, nontraditional and alternative lenders are stepping right into this vacuum created by traditional lending institutions to help individuals and small businesses get the capital they need during this difficult time.
We are seeing a lot of nontraditional and alternative lenders continue to approve short-term loans, payday loans, title loans, and the like on a pretty consistent basis compared to pre-coronavirus numbers – with some businesses even expanding their approval process to help more people get the money they need right now.
Some nontraditional and alternative lenders are seeing application rates increase by anywhere between 27% and 47% in just the last few months.
The slow reopening of the US economy is going to dictate what happens moving forward as far as these kinds of loan application rates are concerned. But the staggered, slow-moving reopening—and the possibility that things never get back to “normal”—make it likely that we are going to continue to see alternative lending and nontraditional lending solutions filling the gaps left by banks and big financiers.
Is a Title Loan the Right Financing Option for You?
If you have found yourself in dire economic straits because of the coronavirus, unable to take full advantage of the unemployment benefits or the unemployment protection offered through the CARES Act, or just aren’t able to make ends meet right now you may be considering alternative lending options like title loans.
These loans are capable of putting quite a bit of cash in your hands in a hurry (usually anywhere between $100 and $10,000, depending on the specifics of your situation), but you want to know exactly what you are getting into before you sign on the dotted line and move forward with this financial decision.
For starters, you need to understand how title loan options work.
The process is pretty systemized and streamlined throughout the industry, and it all starts with you finding a lender that you want to move forward with and requesting a loan to get the ball rolling.
Then, the alternative lender is going to have a look at your vehicle to assess its overall value as collateral. Next, they’ll offer a loan as a percentage of that assessed amount, with the average industry loan in the title loan business coming to about $1000, according to information released by the Pew Charitable Trust organization.
If you agree to the terms of the loan and the amount that they offer you’ll be able to drive off the lot with your vehicle—continuing to use the vehicle as you see fit, without any restrictions whatsoever— inside of about 60 minutes or so.
You will, however, have to leave the vehicle title behind as collateral for the loan that you have just secured.
The Two Types of Car Loans
As a general rule, there are two specific types of car title loans that you might choose to take advantage of moving forward.
The first type of car title loan is called a “single payment loan”.
This is set up between you and the alternative lender to where you repay the entirety of the loan in a single lump-sum payment (anywhere between 30 days and 90 days after you accepted the loan), plus interest. These interest rates can get pretty high, as high as a 300% APR, but also give you a lot of flexibility to make your day-to-day finances work while repaying everything in a lump sum later on.
The second type of vehicle title loan is similar to an installment loan, allowing you to “make payments” against the loan that you have taken out. These kinds of loans usually stretch out between 90 days and 120 days with an industry average APR that sits at about 260%.
There’s no one-size-fits-all kind of solution here and you’ll have to consider your specific financial situation, your financial future, and your ability to repay before signing on the dotted line.
The obvious benefit of these kinds of loans, though, is that they are far more available and accessible than traditional lending is right now.
Requirements and Benefits for a Title Loan
The overall requirements for you to get approved for a car title loan are very, very easy to clear.
Your credit score rarely comes into play and you seldom have to prove or verify your income. All you need is a car title in your hand to get approved.
On top of that, the general process for applying for and getting approved for these loans takes only a few minutes. You’ll know almost immediately if you are going to get approved for this kind of loan (and for how much) and that’s critically important in the middle of one of the worst economic collapses in our nation’s history.
If you want to get a title loan during our economic shutdown, you need to make sure that you are doing business with companies you can trust. Alternative lenders that have your financial future in mind, and not the predatory operators that sometimes flock to this kind of industry.
While title loans have a lot of significant benefits, they aren’t without risk and potential danger.
Sure, you can expect benefits like:
- Almost instant money when you need it most, without having to have picture-perfect credit or any credit at all
- The ability to continue using your vehicle the same way that you always have, without restriction, for as long as your loan exists
- An easy application process that’s about as streamlined and as simplified as possible, taking just a few minutes to get approved so that you can get your cash quickly
But you’ll also have to manage risks that can include:
- Higher interest rates than more traditional lenders (if they were willing to offer you credit in the first place)
- The possibility of your title forfeiture or repossession, especially since you’ll be using your car title as collateral to secure the loan that you are after
- The fact that these loans are almost exclusively very short-term loans with tight repayment schedules
- Hidden fees that some of the less scrupulous or predatory businesses in the industry like to put in the fine print
A lot of those risks can be managed and mitigated by committing to do business only with car title loan companies that are trustworthy.
As long as you are working with industry leaders, car title loan companies with a track record, and reputation that you can independently verify through reviews online, you won’t have to worry about any nightmare scenarios with fly-by-night operations.
Legitimate and trustworthy car title loan companies are going to offer:
- Very competitive interest rates that are specific to your unique situation. These rates may be higher than what traditional lenders would have charged, but legitimate operations will always look for ways to lower your interest rates as much as reasonably possible
- Top-tier customer service with representatives helping their clients deal with defaulted payments to avoid repossession at all costs. A commitment to helping make sure you get your car back when the loan is repaid is a huge piece of the puzzle
- Longer loan terms that stretch out over your payment schedule, so that you find these kinds of loans to be a lot more manageable
- Zero prepayment penalties that allow you to get your loan taken care of and your title back in your hands – as soon as you have the money, even if it means they make a little less money on the backend
It’s important to remember that these alternative lenders are not in the car business.
The last thing that any of these lending institutions want to have to deal with is a repossession of a vehicle, which they then have to manage and sell to recoup their losses. A process that very often eliminates all of the profit that they would have otherwise collected.
Legitimate operators are always going to do everything and anything they can to help facilitate a simple, straightforward, and headache-free title loan process with you.
A little bit of research will help you find these kinds of companies, moving through their application process very quickly, and getting you the cash you need to get through these tough times without worrying about ruining your financial future along the way.
How to Manage Your Title Loan After Returning to Normal
After you have successfully been approved for a car title loan and get through this rough and rocky economic situation it’s time to start better managing the loan so that you can “get back to normal”.
A lot of people have described vehicle title loans as a “comfortable bed” or easy to get into but tough to get out of. There is certainly some truth to that, especially if you are working with companies that make it challenging to prepay your loan and get your title back in your hands. Thankfully though, as long as you zero in on the inside information we highlighted above about finding the right company to do business with you shouldn’t have any difficulty managing your title loan following the shutdowns.
The very first thing you’ll want to do is assess the specific repayment details of your title loan as they exist right now. Like we mentioned earlier, there are two major types of car title loans that you might choose to take advantage of the single repayment kinds of loans and the installment type loans.
Those single repayment loans are going to need to be managed a little bit differently than installment type loans. Industry insiders report that a lot of clients with these kinds of loans wait until the very last minute to scramble for cash to pay them off when they are due rather than putting aside a bit of money every week. This can make for a very stressful end to the loan payment cycle.
This is why it’s a good idea for you to always think of these loans as installment loans, setting aside cash every week no matter what so that you’re able to make your lump-sum payment when the time comes. Installment payments are going to have a very clearly outlined repayment schedule.
Of course, there may come a situation where you’re unable to make certain payments and you must reach out to the car title loan company you are working with ASAP to see if certain arrangements can be made. Most companies—especially right now, during the COVID-19 economic slowdown—are flexible and looking for ways to make sure that you keep your vehicle and are still able to meet your financial obligations all at the same.
Remember, the last thing that these businesses want to do is get into the car business. These alternative lenders are in the money industry, the loan industry, and the last thing that any of them want to have to deal with is the headache and hassle (and extra expense) of finding ways to sell off your vehicle to recoup some of their investment.
So, if you’re having a tough time meeting your payment schedule, it’s a good idea to reach out to these loan facilitators ASAP and come to some sort of agreement about how to best move forward together.
At the end of the day, the economic future of the United States (at least in the short-term) is anything but certain.
No one knows how long it’s going to take until a COVID-19 treatment or vaccine is created—if it’s ever able to be created—and no one knows how long we are going to have to deal with this “new normal”.
All we know for certain is that we are all going to have to tighten our belts a little bit in these early stages, find better ways to manage our money and our finances, and hopefully, all collectively, we will find a way to get people back to work.
If you are feeling the credit crunch and you are finding it difficult to get a loan through traditional sources, a title loan from a legitimate organization just may be the lifeline that you deserve. You’ll want to make sure that you are only ever doing business with legitimate operators, companies that have a long-standing positive reputation in the industry.
The alternative lending space used to be filled top to bottom with predatory organizations crowding out the legitimate operators, but significant crackdowns by state and federal organizations have helped to clean things up a bit. All the same, you should never sign on the dotted line until you looked into the reputation of the business.
On top of that, it is critically important that you always read every single word written in your title loan agreement.
This is going to be a little bit challenging if you are particularly hard up for cash and just want to get things going in a hurry. Remember, the title loan application and approval process usually only takes a couple of minutes, but it’s important that you slow things down so there aren’t any hidden fees or surprise charges that you might get slapped with later down the line.
Make sure you go through the agreement line by line, asking questions about anything you are unclear on, and receive clarification from the title loan company on that agreement before you sign on the dotted line. A couple of quick questions at this point can save you a headache in the future.
Documentation is a huge piece of the puzzle. You’ll have a lot more peace of mind and a lot more confidence moving forward with these kinds of companies when transparency is on full display. Hopefully, we are all going to be able to come out of this economic slump better than we were before.