If Internet search trends are a window into the minds of consumers, then a recent report suggests that a growing number of Canadians are considering some ill-advised financial options, observers say.
In the middle of a related to the pandemic increased interest in personal finance information, the number of searches involving car title loans It nearly tripled in Canada in the March-September period this year to 16,900 per month, compared to around 5,900 searches per month at the same time a year earlier, according to SEMrush.
The Boston-based marketing company that studies Internet search trends said Canadian searches for payday loansMeanwhile, it fell 43 percent to 22,900 from 39,700 during the same period, which was marked by millions of people losing their jobs as nonessential stores and industries were forced to close in an effort to contain the spread of COVID-19. virus.
Payday loan warning
“The most surprising thing we noticed was an increase in demand for car title loan seeking that is, I think, quite unique in Canada compared to the United States, where we did not see this kind of increase,” said Eugene Levin, SEMrush’s chief strategy officer, in an interview.
He said he doesn’t know why searches in the US didn’t increase either, but suggested that a possible explanation for the increase in searches for car title loans and the corresponding drop in payday loans in Canada could be that potential applicants have a car but not a job.
“A lot of people have cars,” Levin said. “The terms of these loans are better than those of the payday loans, the interest rates are lower, so they are more attractive. At the same time, you don’t need a job to get a car title loan, unlike certain payday loans. “
A car title loan works the same way as a home equity loan. They are billed as short-term matters, secured by a lien on the vehicle. In the event of default or default by the borrower, the lender can repossess the vehicle to get his money back.
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Levin said the SEMrush statistics don’t indicate how many searchers signed up for a car title loan.
An online search for “car title loan” produces dozens of results.
Most providers offer a wide range of loan tiers – one promises between $ 1,000 and $ 50,000 – and many say their interest rates are the “lowest in the industry,” at “10 to 49 percent.”
The Canadian Press contacted several auto title loan companies for this story, but no representative was made available.
People desperate for money will always find someone who is trying to cash in on their plight, said Brian Betz, a counselor at Money Mentors in Calgary, adding that car title loans are just one of the many quick money schemes in the world. line they can choose.
“The increase in title loans will probably be more for those who do not have assets. Their car is, for all intents and purposes, all they have, ”he said.
“Usually when you get a title loan, it’s not $ 300 to $ 500. You get a few thousand dollars for that vehicle, and at its interest rates, it can be very difficult to pay it back.”
He said that typically about half of Canadian workforce workers are within a paycheck of being insolvent, so an event like the pandemic can create thousands of desperate situations.
There are better options when bills can’t be paid, Betz said, and they should start by seeking help from an organization like yours, which offers free credit counseling.
If you can’t afford a personal loan or an existing mortgage, you should speak with the lender to see if payments can be deferred or reduced over a longer repayment period, he said.
A consolidation loan can allow the lender to simplify and combine multiple loan payments at a much lower interest rate than a title loan, he added.
Betz cautioned those seeking solutions to a short-term cash crisis to consider the fees associated with the loan, as well as interest rates, using as an example a Calgary customer who was in dire straits after his work hours will be reduced due to COVID-19.
“He had two loans, no title loans, but no payday loans, and even though the interest rate was capped at a certain level, I think it was 32 percent, in exchange for borrowing $ 14,000 through these two loans, there was $ 10,000 in fees added to that, ”he said.
“There was a cancellation fee, an insurance fee, this fee and that fee. These are the kinds of loopholes that these people exploit. “
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