If internet search trends are a window into the minds of consumers, a recent report suggests that a growing number of Canadians are considering unwise financial options, observers say.
Amid a resurgence of pandemic-related interest in personal finance information, the number of searches involving auto title lending nearly tripled in Canada from March through September this year to 16,900 per month, from about 5,900 searches per month at the same time. times a year earlier, according to SEMrush.
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The Boston-based marketing firm that studies internet search trends said Canadian searches for payday loans, meanwhile, fell 43 percent to 22,900 from 39,700 in the same period. , which has been marked by millions of people who have lost their jobs as non-essential stores and industries have been forced to shut down in order to contain the spread of the COVID-19 virus.
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“The most surprising thing we’ve noticed has been an increase in demand for auto title loan research, which I think is quite unique for Canada compared to the United States, where we don’t have saw that type of increase, ”said Eugene Levin, chief strategy officer for SEMrush, in an interview.
He said he was unsure why searches in the United States had not also increased, but suggested that a possible explanation for the increase in searches for auto title loans and the corresponding decline in loans on auto securities. salary in Canada could be that potential applicants have a car but no job.
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“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 an auto title loan like some payday loans do.
An auto 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 his money.
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Levin said statistics from SEMrush do not indicate how many researchers have 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 for. hundred “.
The Canadian Press contacted several auto securities lending companies for the story, but no representative was available.
People who are desperate for money will always find someone who is trying to take advantage of their situation, said Brian Betz, advisor for Money Mentors in Calgary, adding that car title loans are just one of many. fast money online programs that they could choose from.
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“The increase in securities lending is probably more on those who have no assets. Their car is for all intents and purposes all they have, ”he said.
“Typically, when you get a title loan, it’s not for $ 300 to $ 500. You get a few thousand dollars on this vehicle and at their interest rates it can be very difficult to pay off.
He said that usually about half of working Canadians in the Canadian labor force are at insolvency wages, so an event like the pandemic can create thousands of dire straits.
There are better options when bills can’t be honored, 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 loan or mortgage, you should talk to the lender to see if the payments can be deferred or reduced over a longer repayment period, he said. .
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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 loan fees as well as interest rates, using a Calgary client who was desperate after seeing his hours off as an example. reduced work due to COVID-19.
“He had two loans, not title loans but not payday loans either, 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 $ 10,000 in fees added to that, ”he said.
“There were cancellation fees, insurance fees, these fees and charges. These are the types of loopholes that these people exploit.
© 2020 The Canadian Press