Payday, auto title and high cost/small dollar installment loans offer an easy solution to get a small or moderate amount of money quickly, but with one big catch. They are often difficult to pay off and many times put a consumer into a debt spiral that can keep them on the hook for years.
There are currently no limits to the interest rate that can be charged in South Carolina for auto title and small loans. These loans have interest rates that usually start at 70% and go as high as 300% APR. They regularly take collateral, from a car to a car seat. If you do not make your payments, they will repossess the collateral. They often charge for expensive and many times worthless credit insurance, adding to the cost of the loan. The monthly payment is often too much for the consumer and that causes the need to constantly renew the loan, with this often going on for years.
Payday loans work a little differently. Pay day lenders charge $15 for every $100 borrowed, and they must be paid entirely within two weeks to a month. Due to the way they are structured often cause the consumer to need to reborrow as the payment will use up most of the consumer’s available cash for the loan period. The APR for these loans is 391%. These loans can be very difficult to pay back for many South Carolinian and can cause more financial problems over time than the help they provide upfront. They can often lead to eviction or repossession of cars when the borrower can’t repay the loan.
All these loans are often popular because they are fast and easy to get. There is often no credit check, and many of them around the state make it easy to find a location to walk in and get a loan right away.
The owners of these high cost and predatory lending businesses often claim that they fill a need and provide a service. They also claim that there are no other businesses out there willing to make small dollar loans to people who need them. It is this argument that has allowed them to avoid rate caps from being enacted in South Carolina.
Small Dollar Loans
SC Appleseed, in collaboration with SCACED and Village Engage, is excited to share a statewide map of community banks and credit unions that do provide affordable small dollar loans. These loans, found across our state, do not charge the interest rates of these predatory lenders and have affordable terms.
Here are a few key things to know about the small dollar loans that are on this map:
- These loans usually have a small interest rate less than 36%.
- There are no hidden fees.
- Collateral is usually not needed.
- You do have to pass a credit check and an open bank account.
- There are a few ways to repay a small dollar loan: in installments over time, a single repayment option, or money is deducted from your next deposit(s) until the loan is repaid.