When Rakesha Hill’s car broke down, she didn’t have $700 to pay a mechanic. The mother of three from Mesa earns a modest salary working for a charity that helps homeless families.

So, in a pinch, Hill took out a car title loan.

“It was the only option I had at the time,” she said.

Hill, 39, discovered what many consumers do. The interest rate was so high that she had difficulty repaying the loan.

“I was already for a year paying ‘$100 a month,’ Hill said, ‘and nothing was going into the capital.’

Title loans are a common option

Consumers often turn to vehicle title loans when an unexpected emergency arises and they are low on cash.

Four in 10 Americans said they would struggle to cover a surprise $400 expense, according to a Federal Reserve study last year. A Bankrate.com survey estimated that about two in 10 adults have no emergency savings.

But interest rates on home loans can be huge, reaching 204% per year, according to the Consumer Federation of America and the Southwest Center for Economic Integrity.

People can shell out two to three times the amount they borrowed and not come close to loan satisfaction. And if a borrower defaults, the lender can repossess the vehicle and charge additional fees.

The program gives a helping hand to borrowers

Hill felt stuck with her title loan.

“It’s like a cycle. You just pay them enough so they don’t harass you,” she said.

Then Hill heard about a program that might help.

The program, called Lend a Hand, allows qualified Maricopa County residents to borrow up to $4,000 from MariSol Federal Credit Union to pay off a title loan.

The annual interest rate on the new loan, at 15%, is well below that of most title loans. Participants can also receive debt counseling from a separate Phoenix-based nonprofit, Take Charge America, and set up a savings plan so they can get back to financial health.

The Arizona Community Foundation and the Phoenix Industrial Development Authority support the program.

Hill said Lend a Hand made it easy for her to get out of debt.

“(The loan) was so affordable that I was able to pay it off in six months,” Hill said. “If it hadn’t been for the program, I would still be paying off (the title loan) now or I would have had my car repossessed.”

Some unhappy with the program

Lend a Hand is not for everyone.

People with multiple title loans or who are extremely in debt are unlikely to be approved for the loan, said MariSol Federal Credit Union CEO Robin Romano.

MariSol Federal Credit Union CEO Robin Romano

“It’s a great tool for those in the early stages of being trapped,” she said. “The vast majority of people we have to turn away…they owe so much more than they can repay, it’s like putting a bandage on a gushing wound.”

But Romano urged everyone to apply.

“Take the first step and apply. It doesn’t hurt to go through the board, and it doesn’t hurt for us to take a look,” she said.

A participant said The Arizona Republic he was unhappy with the program.

An 80-year-old Phoenix charter school teacher took out a car title loan to pay for his wife’s breast cancer treatments.

After applying for the Lend a Hand program, he said he felt obligated to accept Take Charge America’s debt plan even though he was not approved for the MariSol Federal Credit Union loan.

The organizations said they would review their application materials and interactions with consumers to improve communication about the two separate programs.

How the program works

People who apply for Lend a Hand will first speak with a credit counselor from Take Charge America.

The Phoenix nonprofit can create a monthly budget based on the applicant’s debts and negotiate with creditors to reduce interest rates and monthly payments, waive late fees, shorten the repayment date, and stop debts. collection calls. Take Charge America then takes a small fee from the monthly payments.

Consumers are not required to agree to Take Charge America’s Debt Management Plan to receive the loan from MariSol Federal Credit Union.

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Within a few days of submitting the Lend a Hand request, consumers should also hear from MariSol Federal Credit Union. The credit union may request more information to complete its review of the loan. Thereafter, he will inform the applicant if the loan has been approved.

If the loan is approved, the borrower must open an account with MariSol Federal Credit Union, start making payments on the new loan, and save a small amount of money each month.

“Getting out of the vicious circle”

The Lend a Hand program aims to get participants out of the trap of an existing title loan, as well as help them avoid applying for one in the future, according to program advocates.

“Sometimes people think their only option is to go to Tio Rico or TitleMax,” Romano said. “Anytime we can help people see another way of doing something, that’s a good thing.”

When Hill recently faced another financial emergency, she didn’t go to a lender in title. Instead, she asked MariSol Federal Credit Union to help her out.

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Hill had given birth to a baby boy and had taken unpaid maternity leave.

She has continued to bank at the credit union since completing the Lend a Hand program. The credit union approved a loan at a lower rate than a title loan.

“MariSol is like family,” Hill said. If consumers are “looking for a place where they can save money and get out of the vicious cycle of title lending, I would recommend the program.”

Photo of TitleMax storefront at Alma School Road and West University Drive in Mesa.

How it works

If you have a car title loan, you may be eligible to pay it off by borrowing up to $4,000 at an annual interest rate of 15% from MariSol Federal Credit Union through the Lend a Hand program.

1. Download an application and review the eligibility criteria at www.takechargeamerica.org/lendahand. Or download the app here in English or Spanish.

2. Contact Take Charge America to schedule a free credit counseling session. A credit counselor will offer to help you budget and create an action plan to eliminate debt and save for the future.

  • By phone: 1-877-822-2410.
  • In person: 8 a.m. to 5 p.m. Monday through Friday at 20620 N. 19th Ave., Phoenix.

3. Submit your application and additional documentation to Take Charge America for review.

4. MariSol Federal Credit Union will review your application for loan eligibility.

  • If you are approved, the credit union will repay your title loan and work with you to set up monthly payments on the credit union loan. You will also be required to open a MariSol Federal Credit Union savings account with an initial deposit of $25 plus $10 per month to build up an emergency fund.

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Consumer journalist Rebekah L. Sanders investigates fraud and abuse issues involving corporations, healthcare facilities and government agencies. Contact her at [email protected] Follow her on Twitter at @RebekahLSanders.