Canadians show heightened interest in high-interest auto mortgages amid recession


CALGARY — If Internet search trends are a window into the minds of consumers, a recent report suggests a growing number of Canadians are considering misguided financial options, observers say.

CALGARY — If Internet search trends are a window into the minds of consumers, a recent report suggests a growing number of Canadians are considering misguided financial options, observers say.

Amid a surge in interest in pandemic-related personal finance information, the number of searches involving car title loans nearly tripled in Canada in the March to September period this year to reach 16,900 per month, compared to approximately 5,900 searches per month in the same period. once a year earlier, according to SEMrush.

The Boston-based marketing firm that studies internet search trends said Canadian searches for payday loans meanwhile fell 43% to 22,900 from 39,700 during the same period, which was marked by millions of people losing their jobs as non-essential shops and industries were forced to close in order to contain the spread of the COVID-19 virus.

“The most surprising thing we’ve noticed is an increase in demand for car title loan searches, which I think is quite unique for Canada compared to the United States, where we don’t have seen this kind of increase,” Eugene Levin, Chief Strategy Officer for SEMrush, said in an interview.

He said he didn’t know why searches in the United States hadn’t increased as well, but suggested that a possible explanation for the increase in searches for car title loans and the corresponding drop in loans payday in Canada could be that potential applicants have a car but no job.

“A lot of people have cars,” Levin said. “The terms of these loans are better than 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 title loan. car loan, unlike some payday loans.”

A car title loan works on the same basis as a home equity loan. They are billed as short-term business, secured by a lien on the vehicle. In the event of non-payment or default by the borrower, the lender can repossess the vehicle in order to recover their money.

Levin said SEMrush statistics don’t show how many searchers actually 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 levels – one promises $1,000 to $50,000 – and many say their interest rates are the “lowest in the industry”, from “10 to 49”. %”.

The Canadian Press has contacted several car title lending companies for this story, but no representative has been made available.

People in desperate need of money will always find someone trying to take advantage of their situation, said Brian Betz, an advisor for Money Mentors in Calgary, adding that car title loans are just one of many. quick money online programs that they could choose.

“The increase in title loans is probably more for those without assets. Their car is for all intents and purposes all they have,” he said.

“Usually when you get a title loan, it’s not for $300 to $500. You’re getting a couple thousand dollars on that vehicle, and at their interest rates, it can be very difficult to pay back.”

He said that typically about half of workers in the Canadian labor force are one paycheck away from being insolvent, so an event like the pandemic can create thousands of desperate situations.

There are better options when bills can’t be met, Betz said, and they should start by seeking help from an organization like hers that offers free credit counseling.

If you can’t afford to make payments on an existing personal or mortgage loan, you should talk to 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 warned those looking for solutions to a short-term cash crunch to consider the fees associated with the loan as well as the interest rates, using as an example a Calgary client who was in dire straits after seeing his reduced working hours due to COVID-19.

“He had two loans, not title loans but also not payday loans, and while the interest rate was capped at a certain level, I think it was 32%, in exchange for a borrowing $14,000 through these two loans, there was a $10,000 fee attached to that,” he said.

“There were cancellation fees, insurance fees, these fees and charges. These are the types of loopholes that these people are exploiting.”

This report from The Canadian Press was first published on December 10, 2020.

Dan Healing, The Canadian Press


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