Don’t Make the Cash Call!

I recently spoke to a young woman on the phone who was in tears due to a loan she had taken out to help bail out her (then) boyfriend from almost getting his pickup truck repo’ed. The couple had seen a late night commercial on tv for CashCall, promising quick cash for any need. Of course, the boyfriend convinced her to put the loan in her name since she had better credit than he did. Can you just imagine where this story is going?

She took out the loan for $10,000 and then paid off the truck loan. Just a few weeks later, the boyfriend and his truck had hit the road, conveniently right before the first payment was due on her loan. The monthly amount due was a shocking $826 and she would be required to pay that amount for the next 84 months. If she had only had a calculator handy the night she applied for the loan over the phone, she could have quickly determined that paying off the $10,000 truck loan was going to cost her a whopping $69,000!

At first, I thought that she might have gotten the figures wrong but I verified the rates online and discovered she was paying an APR of 99.75%. Amazingly, the website states a commitment to responsible lending and the reality is that the lender does provide very clear information about the fees and costs of borrowing. However, the fact that it was offered over the phone and promised as next day funding directly to her checking account was too tempting for her (well, actually her boyfriend) to pass up.

With no other option of refinancing this loan, she is stuck with a very tough life lesson. She will never again take a loan out for someone else’s benefit and she will always read the small print from now on. To get out from underneath from this lender’s cash cow, she is moving back home to her parents’ house and redirecting her current rent money of $900 a month to pay off the loan. If she can double up on the monthly payment, she will have the loan paid off in 2 years instead of 7 and will save herself over $40,000 in finance charges.

What’s the moral of the story? If you are ever tempted to consolidate debts or borrow money for a purchase, DON’T make the cash call. Instead, work with a Consumer Credit Counseling Service to help you manage your current debt and walk away from any big ticket item that you dream of as you hear that late night commercial.

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