Buying gifts, travel, and spending money on the holidays is on the forefront of most families minds during the holiday season. But for the sake of ensuring a happy holiday for their loved ones, many find themselves overspending and out of cash. The growing trend of people turning to quick cash solutions is troubling for their financial futures, experts warn.
The difficulty comes with the pressure of wanting to provide friends, family, and loved ones with a memorable holiday experience. A combination of media and advertising pressures, social fears, and a genuine desire to make loved ones happy is pushing many people to the brink of bankruptcy each year.
When families find themselves in a difficult financial situation near the holidays, they tend to spend what they normally would during more stable economic times rather than cut back on their holiday spending. Many parents panic when they realize that they won’t be able to afford their children’s Christmas wish list, and turn to iffy quick cash providers in order to fulfill their kids’ holiday dreams.
It’s an understandable urge, but the real trouble for quick cash-seekers starts after the holidays have quieted down. High interest rates on payday and title loans sinks borrowers deeper into debt than they foresaw, and lasts far past the holiday season.
Local Tucson families are facing crippling payments to their quick cash providers in the post-holiday season, and feel that they were tricked into a seemingly good deal. An Air Force veteran and Tucson father of two, Scott Sweetalla turned to a local quick cash provider; registration loans in Tucson. His desire to be able to “buy some Christmas presents, pay up some bills for my family” turned into a nightmare.
“And the gentleman that answered the phone asked me some questions about my vehicle and then told me ‘I can get you $2,000 for $150 a month’ and I thought, wow, that was great,” said Sweetalla. But he discovered that he also had to pay $300 in interest per month on top of the $150 payments.
When Sweetalla could no longer afford his payments, Maximum Title Loans repossessed his car in the middle of the night. “Woke up the next morning to go to work and my car was gone. My heart kinda sunk. I kinda figured what it might have been,” said Sweetalla. “The money you would get from these people is not worth what’s going to happen later,” he warned.
Christopher Peterson, Special Advisor to the Director of the consumer bureau also cautions potential borrowers. “There is currently no federal rule that requires lenders to consider whether or not the consumer has the ability to pay in small-dollar loans like payday loans or car title loans. ...We are very concerned about practices in the marketplace that appear to trap consumers in debt,” said Peterson.
“They keep putting themselves into debt traps because they believe that that’s the only option available to them,” agreed State Rep. Debbie McCune Davis, D-Phoenix. “I think we actually push those families deeper into debt and further away from opportunity for themselves and their kids.”
Despite repeated warnings from financial experts, low-income families throughout Arizona continue to seek out quick cash solutions during tough times, and quick cash lenders are on the rise.