Borrower beware: Title loan left man with 120 pct. interest

Borrower beware: Title loan left man with 120 pct. interest
BAKERSFIELD, Calif. -- When people are unemployed and have no income paying the bills or even getting a loan to pay the bills is next to impossible.

Many may resort to getting a title loan to get cash in order to get by, but one man discovered how costly that can be.

Like many Kern County residents, the man who called the Eyewitness News tip line has been hit hard by the bad economy.

"Received absolutely no income for four months and I needed to get some money," said the caller, who spoke on condition of anonymity. "So I went online and looked for (title) loans in Bakersfield."

Title loans give a person a loan while using the borrower's car title as collateral.

Eventually the man found RPM Auto, Pawn & Car Title Loans in downtown Bakersfield.

He said the woman he spoke with on the phone quoted him a three-year, $6,000 loan at a 9 percent interest rate. So he went to the Department of Motor Vehicles and added RPM to his car title.

But when he went back to RPM to pick up his money and sign the paperwork, he got a big surprise.

"She handed me the paperwork, I looked down and it wasn't 9 percent," he said. "It was 9 percent per month, which ended up being 120 percent per year."

An annual interest rate of 120 percent means the man would have to pay more than $22,000 on a $6,000 loan. But he signed, because he needed the money right away.

Though he didn't think it was a fair tactic, "You're standing there and you're stuck, and their name's on your title, but I needed my electricity to stay on."

Connie Alarcon with the Better Business Bureau in Bakersfield looked over the loan agreement to see if it was legal.

It is, she said.

Unfortunately, Alarcon knows that the bad economy means more situations like these will happen.

"Times are hard and people are stressing and just grasping at straws," Alarcon said.

To keep consumers out of a similar situation Alarcon advises consumers to, "Be proactive, do the research, check out the company (and) ask questions."

It's a lesson man who called the Eyewitness News tip line learned the hard way.

"I thought I was a smart consumer," he said.

In a bit of good new for the man, the loan he got was a simple interest loan, meaning there won't be a penalty if he pays off the principal early, which he plans to do.