Investment Riches on Subprime Auto Loans to Poor

[HerrStig]

Aside from having the car reposessed, these people are judgement proof so many loan companies install car immobilizers so they can shut the car down by phone the day the payment is over due.
We really have created a mentality through politics where "entitlement" is sold in place of "work for it".

 

[splinter]

No doubt it's tough out there for a lot of folks, but astute financial planning and common sense seems beyond the grasp of so many these days.

Quote:
..“I looked him in the eye and said, ‘I don’t have any income,’ ” said Ms. Payne..

Ms. Payne's financial situation may continue to worsen should she continue to forgo earning any income.

Quote:
..A former mortgage broker who declared bankruptcy, Mr. Carpe fell behind on his payments..

One could reasonably assume Mr. Carpe would have a better understanding of financing and, at least, stiffing creditors.

 

[d00df00d]

Originally Posted By: gathermewool
11% on a loan with bad credit is not a bad deal. Having the ability to pay for and actually knowing ABOUT the loan are pretty important, though, and is more my concern. My family all drove beaters while I was growing up, $500 car after $500 car. No loan-shark loans and no living beyond your means. Was it an 80s thing or has preying on the poor become so easy?

It has always been incredibly easy to bilk poor people. It still is. It probably will always be. They're disproportionately under-nourished, over-stressed, under-educated, and desperate. Understandably so, I'd say. Not exactly a recipe for reliably sane decision making.

 

[shinyWheels]

If they don't loan then they are discriminating against the poor. It's more in the best interest of the loan company to find people that can pay back the loan because I would think they make more money when they pay the loan off than by repocessing the car and selling it again especially in the case where this lady didn't make a single payment. Taking a risk on someone not being able to pay the loan off and having to pay a tow truck driver to get the car back cost money.

The sales guy doesn't care if you can't pay the loan back, he'll get his commission and be done.

 

[addyguy]

Originally Posted By: AdRock
I'm not rich by any means, but I also don't really fault someone for making money in this situation. Nobody held a gun to anyones head to sign u for something they can't afford. If they are so ignorant as to not look at their finances and make the right decision then they get what they signed up for. I don't feel sorry for them. It's the complete lack of personal responsibility that runs rampant these days. If I signed up for a ripoff loan then I'd be the idiot, not the person giving me the loan.


Agree 100%.

 

[philipp10]

We need to teach a LOT more about finances in schools. Maybe with some education people would use some common sense and just buy that car that they can afford with cash. I feel for these people but I also realize that borrowing money at 23% is NEVER a good long term move. Of course there is the old adage, give 100 people a $1000 and in a couple years, one guy will always end up with it all, the other 99 too stupid to hang on to it.

 

[kozanoglu]

Market economy I know but this is not a healthy practice for the market itself. 23% interest on a zero inflation environment? They know these people would sooner or later will not be able to continue payments. Till then it is bonanza, and after? Government bailouts?

There has to be some kind of regulation limiting vultures.

There is a hole in the road and some blind is walking towards it. Isn't it sound to prevent the fall rather than pay for rescue after the fall?

Food stamp for food is not the issue. It is the food stamp for the wealthy.

 

[HerrStig]

Originally Posted By: d00df00d
Originally Posted By: gathermewool
11% on a loan with bad credit is not a bad deal. Having the ability to pay for and actually knowing ABOUT the loan are pretty important, though, and is more my concern. My family all drove beaters while I was growing up, $500 car after $500 car. No loan-shark loans and no living beyond your means. Was it an 80s thing or has preying on the poor become so easy?

It has always been incredibly easy to bilk poor people. It still is. It probably will always be. They're disproportionately under-nourished, over-stressed, under-educated, and desperate. Understandably so, I'd say. Not exactly a recipe for reliably sane decision making.
Nobody starves in the US today, not even illlegals. I see MANY suffeing from the problems caused by BAD nutrition, not starvation. EBT cards will buy solid nutrition, or slap it on the table junk food.

 

[OneEyeJack]

Have you forgotten "rent-to-own" deals? Do you have one of those stores in your area? Have you added up the cost of renting some piece of junk?

The proprietor of one such store said he tracks welfare people and as the numbers increase in an area it's time to open a new rent-to-own store. One thing he did mention is that in dealing with welfare people especially illegals on welfare you must be prepared to break hundred dollar bills. That and the neighborhood makes managing cash very important.

 

[Pop_Rivit]

Originally Posted By: AdRock
I'm not rich by any means, but I also don't really fault someone for making money in this situation. Nobody held a gun to anyones head to sign u for something they can't afford. If they are so ignorant as to not look at their finances and make the right decision then they get what they signed up for. I don't feel sorry for them. It's the complete lack of personal responsibility that runs rampant these days. If I signed up for a ripoff loan then I'd be the idiot, not the person giving me the loan.


Agreed. Everyone has a choice to manage their finances responsibly-it makes no difference if you make $20,000/year or $200,000/year.

And not surprisingly, irresponsible financial management runs rampant among the rich as well as the poor. Common sense isn't all that common.

 

[jimbrewer]

I believe in good old fashioned usury laws. We used to have them before we decided to turn the country into a Libertarian paradise.

I'd say 8 points over the 5 year federal bond rate is about right.

No doubt some Horatio Alger type guy occasionally takes out a loan like that and makes good with it, but for every one of those, there are ten that go south, and I expect the failure rate rises exponentially, not linearly as you move towards the extremes.

Yeah, yeah, I know people have the right to make their own choices in life, but what benefit is there in these kinds of loans to society as a whole? I would submit very very little, and plenty of downside in the form of people who are financially crippled for a very long time.

 

[MrHorspwer]

It's really easy to demonize *people*. Blame them, chastise them, call them stupid, irresponsible, or lacking common sense.

But look at the people pushing the loans. They *know* these people can't afford the loans. They *know* they're going to default. They *know* that people can resist that carrot though... a nice, shiny Bavarian carrot.

They're a lot like drug dealers. They're only providing a service. You can't hold *them* accountable because people aren't responsible enough to stay away from heroin, right? If people were just more responsible, there'd be no drugs. I'm sure you wouldn't mind a dealer hanging out on the corner down the street from your house. Your kids are responsible. Nobody's putting a gun to their head. If they did develop a coke habit, it's your kids problem, not the dealers. He's an innocent victim in all this, just providing a service to the stupid. After all, it's not like your kids coke habit is going to affect society in any way whatsoever.

Then they bundle these dangerous loans and sell them as securities to the unsuspecting. But hey, that's alright! Nobody held a gun to their head, did they?

It's so much easier to demonize a person though. :smh:

Originally Posted By: jimbrewer

Yeah, yeah, I know people have the right to make their own choices in life, but what benefit is there in these kinds of loans to society as a whole? I would submit very very little, and plenty of downside in the form of people who are financially crippled for a very long time.


Quoted for truth.

 

[Subdued]

The drug dealer analogy isn't all that great because drugs aren't legal and there is a large public education campaign against them.

Now if these loans were not legal and there was a large public education campaign against them we can say they're similar.

That said, there SHOULD be a public education campaign on fiscal responsibility. But it can't be government run because let's be honest, they have no idea how that works.

They can't even seem to keep anti-predatory loan laws on the books, and it's entirely because those laws "disproportionately make it difficult for poor people to get loans"

You're [censored] right it is, and it should be! They can't pay them back! It's not discrimination, it's sound fiscal sense!

 

[MrHorspwer]

Originally Posted By: Subdued
The drug dealer analogy isn't all that great because drugs aren't legal and there is a large public education campaign against them.

Now if these loans were not legal and there was a large public education campaign against them we can say they're similar.

That said, there SHOULD be a public education campaign on fiscal responsibility. But it can't be government run because let's be honest, they have no idea how that works.

They can't even seem to keep anti-predatory loan laws on the books, and it's entirely because those laws "disproportionately make it difficult for poor people to get loans"

You're [censored] right it is, and it should be! They can't pay them back! It's not discrimination, it's sound fiscal sense!


No, the drug dealer analogy is great because predatory loans *should* be illegal. Just as much as slinging dope is. We hold dealers accountable for preying on addicts, why not hold lenders responsible for encouraging the same habits?

That's right, because high interest loans make money and it's easy to hide risk in securities. Plus, politicians can explain the whole thing away using your excuse of laws "disproportionately make it difficult for poor people to get loans". Of course, you need to conveniently ignore who's bankrolling their campaigns and spreading lobbying dollars all over Washington.

The real thing that makes my drug dealer analogy not all that great is that drug dealers haven't formed a lobby (yet).

"Oh, we know your credit identifies you as a risk. Instead of limiting our investors exposure and lending you money for a reasonable priced car, something you actually *might* be able to keep up on payments, we're going to lend you enough to buy a BMW. We know you'll probably default eventually, especially since you just told me you didn't have a job. It's no matter to me though. I'll get my commission and the lender will bundle this risk with some other loans, make it look safer than it actually is, and sell it as an investment! Everyone wins!"

The guy who said that sounds like a bank of value and trust. It's the poor people who are shady and can't pay back loans though...

 

[rjundi]

There is always an element of our society who will profit from the poor and inept. I know a few folks involved in these types of businesses and a complete and utter lack of any class with them. Money will never buy them class..... They own Rent to own's, used car lot with pay here, and former owner of a door to door saleman type with its own financing and they reap money in.

 

[99Saturn]

Lumping drug dealers and these lenders together as the same? Might as well lump in tobacco and alcohol companies, oh and don't forget those companies that sling and market trans-fats and extra large cokes.

 

[02SE]

Originally Posted By: eljefino
At what point did that woman on food stamps with no income think that buying her daughter a BMW was a swell idea?


Life is hard. It's even harder when you're stupid.

 

[Mr Nice]

Originally Posted By: shinyWheels
If they don't loan then they are discriminating against the poor. It's more in the best interest of the loan company to find people that can pay back the loan because I would think they make more money when they pay the loan off than by repocessing the car and selling it again especially in the case where this lady didn't make a single payment. Taking a risk on someone not being able to pay the loan off and having to pay a tow truck driver to get the car back cost money.


Just like the housing crash, people were given loans because its discriminating against the poor if you don't approve their loan. Pass silly laws to help the low income folks purchase houses they can't afford.

 

[eljefino]

Originally Posted By: d00df00d

It has always been incredibly easy to bilk poor people. It still is. It probably will always be. They're disproportionately under-nourished, over-stressed, under-educated, and desperate. Understandably so, I'd say. Not exactly a recipe for reliably sane decision making.


Yes but anyone with the option to buy a ten year old cavalier vs a BMW should know the BMW will be more expensive to tag and insure let alone maintain and finance. Dingbat should have stood her ground and said she wanted something cheaper.

I get being bilked by elaborate contract switcheroos and whatnot but she was doing "the ghetto thing" of putting something in her name because it was still "good" as a shill for someone who was already too "tainted" to buy-here-pay-here. This happens ALL THE TIME with drivers with OUIs putting cars in their girlfriends' names for cheaper insurance etc and we all pay.

I'd be more on the victim's side if she signed for her own car but the "evil dealer" took some unsafe clunker and polished it up and it blew a ball joint on the way home.

 

[d00df00d]

Originally Posted By: HerrStig
Nobody starves in the US today, not even illlegals. I see MANY suffeing from the problems caused by BAD nutrition, not starvation. EBT cards will buy solid nutrition, or slap it on the table junk food.

I sincerely wish that were true. A buck just doesn't buy much these days.

The main problem is that poor people never have enough money at a time to buy more than one-off meals (as opposed to, say, batches of ingredients to cook with). In most places where poor people live, the cheapest one-off meals are all colossally unhealthy.