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How To Get Out of an Upside-Down Auto Loan

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All is not lost if you find yourself upside-down on a car loan. Also called being underwater or having negative equity, being underwater means that the balance of your auto loan is higher than the value of the car. Having negative equity is no problem when everything’s going right, and you still enjoy your vehicle. It becomes a huge issue when you lose your job and can’t make your payments, the car gets stolen, is declared a total loss by your car insurance company, or you want (or need) to sell it. 

Read our guide to upside-down car loans to learn why having one is dangerous to your financial future. 

The coronavirus crisis amplifies the issues with having an underwater car loan. First, unemployment is going to spike in nearly every segment of the economy, making it harder for people to make their payments. With reduced market demand, your car is probably worth less than it was before the outbreak. Within a couple of weeks, your underwater car loan may have moved from being a minor issue to one that can significantly damage your credit score if you don’t take action now. 

We’ll talk about how the COVID-19 pandemic provides both challenges and opportunities in the last section of this guide. 

Some ways are better than others when it comes to getting out of an underwater car loan. Do it wrong, and you can wreck your credit for years. Do it right, and you might not affect your credit score at all. Here are several ways to proceed. We’ll start with the least damaging to your financial future and move to methods you want to avoid if at all possible.

  1. Determine How Far Underwater Your Car Loan Is
  2. Pay Your Loan Until You Have Positive Equity
  3. Cover Yourself With Gap Insurance
  4. Sell Your Car
  5. Refinance Your Loan
  6. Buy a New Car With a Huge Rebate
  7. Get a Side Job
  8. Trade Your Car In
  9. Avoid Risky Methods of Getting Cash
  10. Let Your Car Be Repossessed
  11. How Does the Coronavirus Change What You Need to Do? 

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1) Determine How Far Underwater Your Car Loan Is

Before you can determine the best route to get out of a car loan with negative equity, you need to figure out how far underwater you are. Subtract the book value of your car from the balance of your car loan. If the number is positive, you have positive equity and nothing to worry about.

If the number is negative, you have negative equity. If something awful were to happen to the vehicle, you would not get a check big enough from your insurance company to pay off the loan. If you want to get a different car, it would be hard to get enough money to cover the balance of your current financing. If you lose your job and can’t make your payments, you lose the option of selling your car and paying off the loan balance. Depending on the size of the negative equity, it’s either a minor problem you could cover with savings or a major issue that could be a financial calamity.

Several websites can help you find the value of your used car. Our used car finder can show you what similar vehicles to yours are selling for in the marketplace.

2) Pay Your Loan Until You Have Positive Equity

By far, the best way to get out of an upside-down car loan is to continue making timely monthly payments until you work your way into positive equity territory. While most cars depreciate rapidly during their first few years on the road, the depreciation curve flattens out as the vehicle gets older. That makes it easier for your payments to outpace the vehicle’s loss in value. As you pay off your loan balance, more of each payment goes toward principal and less toward interest. That shift also quickens the pace at which you gain equity.

Yes, this means you are stuck with your current car. That’s a far better problem to have than damaged credit or an even deeper financial hole you have to dig yourself out of. If you need to dip into your savings to continue making payments, and you can do so without depleting your emergency fund, it’s a good idea to do so. 

Making an extra payment or adding a few bucks to each monthly payment will quickly help you gain traction toward positive equity territory. Adding a bit extra to each of your car payments will also shorten your loan term and reduce the total amount you pay in interest. Before you employ this strategy, be sure you check your loan documents to make sure there’s no prepayment penalty. Few auto loans have this clause. 

There are other benefits to making each monthly payment in full and on time. Your lender will report that you are “paying as agreed” to the credit bureaus, which can improve your credit score. That, in turn, can give your score enough of a boost to let you refinance your car loan at a lower rate.

A rising credit score can potentially reduce your auto insurance premiums. You can use the cash you save to accelerate the payment of your car loan. 

3) Cover Yourself With Gap Insurance

Insuring your car with gap coverage is a way to protect your finances from a devastating loss. Gap insurance is a product that covers the difference between your auto loan balance and the value of your vehicle. It is used in case of theft or declaration by an insurance company that your vehicle is a total loss after a collision. The policies are designed to protect the lender just as much as the borrower by ensuring the loan gets paid off.

It’s available from many insurance companies, lenders, and car dealerships. The costs and coverages vary greatly, so it’s essential to read the contracts and shop around for the best deal. Note that gap insurance does not cover the difference if you sell the car. It typically only covers you up to a certain amount if your loan balance includes a rollover of another vehicle’s financing. 

In most cases, gap insurance won’t help you if you’ve suffered a job loss or a reduction in hours that prevents you from making your car payment. 

Our guide to gap insurance explains the coverage in detail. 

4) Sell Your Car For the Most Money You Can

Another way to get out from under an upside-down car loan is to sell the vehicle, then use the cash to pay off as much of the loan as you can. Since the car you have negative equity in has a value that isn’t high enough to completely satisfy the financing balance, you’ll have to chip in extra from your savings to fully pay off the loan.

Only do this if you absolutely need to get out from under the loan. If you can continue making your payments and the car is still working for you, there’s no need to sell it just for the sake of selling it.

To keep the amount you have to spend out of pocket to a minimum, you’ll want to get the maximum amount for your sale as possible. That generally means you want to sell it yourself to another private party. You’ll want to spend some time and effort in preparing the car for sale. Still, you don’t want to perform any costly maintenance that doesn’t add more value to the vehicle than you put into it.

Our guide to How to Sell Your Car is a great reference to study when you’re getting ready to sell. Here are a few steps you’ll want to take:

Get Your Documents Together

Buyers won’t want to wait for you to get all of your past service paperwork and arrange for the car’s title to be released. Before you put your vehicle up for sale, gather all of the documents you have, including service paperwork and documentation that any damage was professionally repaired. Contact your lender, so you understand their process for getting your title, and you can quickly do so when you sell the car.

Most buyers will want a vehicle history report before they buy. If you purchase one yourself, you can show it to all prospective buyers and check it to make sure all of the information is accurate and complete.

Prepare Your Car To Be Sold

It’s worth spending a weekend getting your car’s appearance in tip-top shape before you advertise that it is for sale. You don’t have to go overboard, but giving the vehicle a thorough exterior wash, wax, and interior cleaning will make an excellent first impression with potential buyers. If it looks like you have taken care of your car, they’ll typically be willing to pay more for it.

Martin Diebel / Getty Images

If there are minor repair or maintenance tasks that won’t cost you much money, go ahead and get them done. Just don’t perform any costly maintenance or replace the tires, as you won’t get the money you invest back from the sale. 

Set the Right Price

While it would be lovely to get as much out of the car as it is worth, you need to price the vehicle realistically and be willing to accept somewhat less. Remember, the whole reason you’re considered upside-down is the car’s loan balance is higher than its value. 

There’s an art to setting the price of a used car. It has to be low enough to attract interest, but high enough that you have some room for negotiation below the asking price. The higher the price, the longer it will typically take to sell. The lower the price, the faster it will likely sell. If, however, you price it too low, shoppers will think something’s wrong with it. Too high, and you had better be able to tell shoppers why it’s worth so much. You can answer some of those pricing questions in your ad by saying things such as “needs brakes” or “new tires 1,000 miles ago.”

Advertise the Right Way in Free Places

Remember, you need to get as much cash out of your sale as possible. That means using free advertising, such as a Craigslist posting, to sell your car. Paying for ads in newspapers or other sites costs money you could otherwise put toward your underwater loan. 

An attention-getting ad needs a complete description of the car, including its standard features, optional features, mileage, and list of any extras to be included in the sale, such as custom wheels or bike racks. If you have done recent service or have just replaced the tires, include that information to let buyers know they won’t have those expenses. Include as many sharp, clear, and well-lit photos as you can. You want to include pictures of all sides of the car, but make sure your home address and license plates are not legible. Include the phrase “as-is” somewhere in the ad and include language such as “or best offer” or “firm” to signal buyers whether you are flexible on the price. 

Many places restrict the parking of cars with “for sale” signs in the windows. Before parking on the street, a public lot, or a private parking lot, be sure to get permission. A parking ticket or tow bill can be expensive, and you want your money going toward paying off the car loan instead. 

Show Your Car Safely

Never invite a potential buyer to your house to look at the car. Instead, meet them in a neutral location, such as a police department’s safe exchange zone or a shopping mall parking lot. Make sure it’s an area covered by conspicuous video surveillance, as it tends to weed out scammers.

Klaus Vedfelt / Getty Images

Many potential buyers will be evaluating you as much as the car. Dress nicely, but not over the top. Acting confident, prepared, and professional signals buyers that you won’t be a pushover during price negotiations. 

Test Drives and Inspections

Any savvy and serious buyer will want to take a test drive and get a pre-purchase inspection done by an independent mechanic. Don’t allow them to test drive alone, but protect yourself by sending a copy of their driver’s license to a responsible friend before the ride starts. If you feel unsafe, outnumbered, or just have a bad feeling about the circumstances, postpone the test drive until you can bring a friend along.

Never allow someone who is test driving your car to operate in an unsafe manner. First, they could cause an accident with injuries. Second, if they wreck your car and it is totaled, you won’t get enough from the insurance company to cover your loan, and that’s why you’re selling it in the first place.

With any used car purchase, a pre-sale inspection is a good idea. You should expect serious buyers to request one. You’ll need to make your vehicle available to a mechanic of their choosing. If you don’t, it’s a red flag to buyers, and they’ll likely walk away from the deal. 

Negotiate to Get the Best Price

Negotiating the price of a car is a little bit art, a little bit of science. Your best tools are confidence and information that backs up the amount you want to charge. It’s common for buyers to offer a low number to start, as it tends to shake your confidence in the price you’re asking. You want to counter their offer with one that’s just a little below the asking price, backed up with reasons why your car is worth what it is. Remember, once they offer a price, they can’t go lower. Once you counter, you can’t go higher.

If you can’t come to an agreement with a potential buyer, feel free to get their contact information and walk away. Don’t fret about the time you invested, as your only goal in selling is to get the highest value possible. If you get several low offers, you may have to reassess the value of your car and lower your expectations.

Completing the Paperwork and Getting Your Money

When you sell a car to another private party, you and the buyer need to complete all of the paperwork yourselves. That includes a bill of sale, transfer of title, any other paperwork your DMV and the buyer’s lender requires. You can download basic bill of sale forms online. Just make sure they state that the car is sold as-is and the sale is final with no warranty.

Never accept payment for a car by personal check or money order. Only accept a cashier’s check if you can accompany the buyer to the bank and receive the check directly from the teller. Cashier’s checks, once the gold standard of payments, are now relatively easy to forge. If you have no other choice but to accept one, make sure you verify its authenticity with the issuing bank (not your bank) before you transfer the car’s title to the buyer. Accepting cash is generally the best way to get paid. Even with cash, you’ll want to take precautions to ensure your safety and make sure the bills are authentic.

When the sale is complete, pay off as much of your loan as possible with the proceeds. You might need to take out a personal loan to pay off the negative balance, as you can’t keep the car loan. With no collateral (your car), the bank will likely call your remaining auto loan balance due. Be sure you remember to cancel your car insurance.

5) Refinance Your Loan

There are a couple of times that it’s advantageous to refinance your auto loan, to either reduce the amount you’re underwater or increase your rate of payback. If you have some cash, you can pay the amount you’re underwater and refinance your car with a loan that has a loan-to-value (LTV) ratio of 100% or better. With that level of LTV, a lender will likely give you favorable loan terms, including a competitive interest rate.

The other time you want to refinance your car loan is if you had bad credit when the loan began, and you have been making all of your payments on time and in full each month. If that’s the case, your credit score may have improved enough that you’ll qualify for a loan with a lower interest rate. With a lower rate, you can pay down the loan principal faster and move beyond negative equity. 

While many lenders can refinance auto loans, if you have significant negative equity or credit problems, it’s a good idea to shop for financing at smaller lenders. They’re more likely to have the flexibility to listen to your story and customize loan options to fit your circumstances.

There’s one more thing to remember about borrowing on a car with negative equity. Since lenders use the vehicle as collateral, any financing that is greater than the value of the car is essentially an unsecured loan. It will come with a higher interest rate due to increased lending risk. 

You only want to refinance if it will reduce the interest rate or the length of the loan. Never refinance to lengthen the loan, as doing so will keep you underwater longer, and you’ll pay much more interest over the course of the loan. 

Read our guide to auto loan refinancing to learn more.

Get the Car Loan That’s Right for You

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6) Buy a New Car With a Huge Rebate

This next method is a bit tougher. You have to find a car with a massive cash rebate. It not only has to cover the negative equity on your current loan, but also the amount of value your new car loses the moment you drive it off the dealer lot. You can find the best new vehicle purchase incentives on our new car deals page

Here’s an example of how this might work. We’ll say you owe $22,000 on a car that’s only worth $20,000. That means you’re $2,000 underwater on your current car loan. Next, let’s say you’ve found a new $30,000 car with a $5,000 rebate, so you need to take out a loan for $25,000. When you purchase the new car, the dealer will pay off the $22,000 you owe on your old vehicle by applying its trade-in value and add $2,000 to the new loan. That takes care of the negative equity, making the new loan balance $27,000.

So, now you have a new car worth $30,000 and a $27,000 car loan, meaning you have $3,000 in positive equity, right? Well, not exactly, because the second you leave the car lot, the value of the car drops significantly. You probably have a $27,000 car with a $27,000 loan, though that’s better than having a car that’s $2,000 upside down. 

7) Get a Side Job

In today’s job market, it’s not too hard to get a side hustle to get a little extra cash and pay down your car loan. It can be anything from driving for a ride-hailing company such as Uber or Lyft, delivering packages in your personal car for Amazon.com, freelance work, or a more traditional job for a few hours per week. 

You have to be disciplined enough to put the cash toward your car debt, rather than spending it on other things that won’t help your financial fitness in the long-run. The nice thing about some side gigs is that you can jump in and out of the work as you need more cash. 

Having a side job is also an excellent way to save up a substantial down payment for your next car. The larger the down payment, the less chance you’ll have negative equity on the loan.

8) Trade Your Car In

We’re now to the part of the list that includes methods you want to avoid if at all possible. At this point, you’re in a place where you can easily dig yourself deeper into debt, put your credit rating at risk, and do long-term damage to your financial stability.

While you can use your current vehicle as a trade-in at a car dealership, you’re unlikely to get enough value out of it to completely pay off your existing car loan.

Car dealers have to incur costs refurbishing the cars they take in as trade-ins, cover the costs of purchase and sale paperwork, and make some profit. To cover these costs, they will generally give you a low trade-in value, which won’t come close to covering your negative equity. 

To make matters worse, you won’t have money to put toward a down payment, so you can expect a high interest rate on your next loan. 

If you find a dealer offering to pay off your trade-in, it’s important to understand what they’re really doing. Yes, they will pay off your current car loan, but only part of the money will come from your trade-in. They’ll get the rest by rolling the negative equity from your old car onto your new car loan. You’ll instantly have negative equity on your new loan. As the new car is likely to depreciate faster than you’ll be able to pay down the balance, you’ll only get deeper underwater during the first couple of years of the loan.

While a salesperson may tell you that it’s no big deal, rolling the balance of your current car loan is a financial disaster waiting to happen. If the vehicle is stolen or declared a total loss, you can find yourself thousands of dollars or more in the hole. In the worst-case scenario, this irresponsible financial decision can lead to bankruptcy.

9) Avoid Risky Methods of Getting Cash

There are a couple of ways to get out of an upside-down auto loan that will work out fine if everything in your life goes perfectly. The problem comes if you have any hiccups in your financial life. One of these methods put you at risk of high interest rate debt, while the other puts your home at risk.

Credit Cards

Some financial experts suggest getting a credit card with a zero percent introductory offer and using the card to pay off your negative equity. They recommend you then pay off the credit card before the introductory rate expires. Once your car loan is into positive equity territory, you refinance your loan with a lower rate or shorter term. 

Colin Anderson / Getty Images

There are a few problems with this approach. First, most introductory offers only allow zero percent interest on purchases, not the cash advance you would need to pay down your auto loan. Cash advances on credit cards typically have rather high interest rates, as they’re unsecured debt. 

If you can find an introductory deal that covers cash advances, the interest rate will jump to a high rate once the introductory period ends. Unfortunately, if you don’t get the card paid off on time, you’re saddled with expensive new debt. Replacing low-interest rate car payments with high interest rate credit card debt is a lousy way to get out from under an upside-down car loan.

Home Equity Loans/Home Equity Lines of Credit

Using a home equity loan or home equity line of credit (HELOC) is another risky way of getting out of an upside-down car loan. When you take out a HELOC, you’re borrowing against your house to pay for your car. The interest rates are low because your home is used as collateral. You’re literally risking the roof over your head to pay for your vehicle. If you think that sounds like a horrible plan, you’re right.

Of course, if everything in your life goes perfectly, you’ll be able to pay off both your car loan and the home equity debt. It’s when life events get in the way that you’re in financial jeopardy. If things go terribly, you can lose both your car and home. 

10) Let Your Car Be Repossessed

The last thing you want to have happen when you have negative equity is to have your vehicle repossessed. If you can’t possibly make your car payments, you’re much better off selling your vehicle for the highest price you can get. Then paying off the majority of the loan.

When your car is repossessed, you cannot expect the bank to auction it for anywhere near its highest possible market value. Plus, they’ll have to pay the repossession company that tracks down and reclaims your vehicle. That cost is added to your loan balance. The lender is likely to sue you for the total unpaid debt.

Some debtors think it’s a great idea to play hide and seek with their car to prevent the repossession company from finding and taking it. It’s a horrible plan, however, as the repo company will bill the lender for all of the hours they have to spend chasing it down. That bill is added to your loan balance, so you only cost yourself money by playing games. A better idea (but still not a good option) is a voluntary repossession, where you take your car directly to the lender and hand over your keys. 

11) How Does the Coronavirus Change What You Need to Do? 

The COVID-19 pandemic has changed the automotive marketplace overnight. Your car may not be worth what it was a week ago, you may have suffered a job loss, and you may not be able to sell your car easily. On the flip side, you may have more money you can spend getting your car loan above water. 

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Car Values Have Changed

The used car market operates on supply and demand. With the outbreak, job losses, and social distancing norms, there are likely far fewer used car buyers in the marketplace. Fewer buyers means less demand and declining used car values. Remember, the value of your car is the price you can sell it for today. 

Michael Ciaglo / Getty Images

Values have dropped but consumer loan balances have not. Car owners who were well above-water two weeks ago may now be hundreds or thousands of dollars underwater. Owners who were just a little underwater then, are now likely much further upside-down. 

You’re More Likely to Miss Payments

The outbreak is disrupting the U.S. job market, with tens of thousands of Americans facing unemployment or reduced hours. When you lose your income, it’s harder to make your car payments. If it gets so bad that the bank repossesses your car, they can still come after you for the difference between what you owe and what they can sell it for. That number is now likely larger. 

Many lenders have programs to defer payments until the worst of the pandemic subsides. If you think you might miss a payment, you should communicate with your bank, credit union, or other lender to take advantage of whatever programs they’re offering. It’s important to note, however, the interest will keep accruing on your loan, even if you’re allowed to skip a payment. You’ll likely come out of the other side of the crisis further underwater than you were before. 

Our guide to what to do if you can’t make a payment due to the pandemic takes you through the steps you need to take immediately to protect your car and credit. 

You May Not Be Able to Sell Your Car Easily

One of the best strategies to get out from under an upside-down car loan is to sell the car for the maximum amount you can, and pay off as much of the loan as you can. With social distancing and strict shelter-in-place orders in place across a growing swath of the country, being able to sell a car may be difficult or impossible. Until the crisis is over, you’ll likely have to use online tools to sell, and be willing to make concessions to uneasy buyers. You may have to let them test drive your car solo, which is not something you normally want to do. 

Opportunities to Get Into Positive Equity Territory 

If you’re in a job that’s not at risk, you have plenty of money in your family’s emergency fund, and you qualify to receive the stimulus checks the federal government is considering, the time you spend at home may free up some cash to get your car loan above water. 

POJCHEEWIN YAPRASERT / Getty Images

Consider taking the money you have budgeted for spring travel, sporting events, or concerts, and diverting it to your car loan. Every dollar you put toward your loan gets you closer to positive equity territory. It’s also a dollar you’re not paying interest on. The Federal Reserve’s interest rate cuts will probably significantly reduce the amount you would make if you put the money in savings, making paying off higher interest rate car debt a more attractive alternative.

More Shopping Tools From U.S. News & World Report

One reason borrowers fall into the trap of an upside-down car loan is they didn’t buy the right car in the first place. Our new car rankings and reviews and used car rankings and reviews are designed to help you find a vehicle that meets both your needs and your budget.

You can also fall into the trap of negative equity if you overpay for your car or are talked into financing costly add-ons. The U.S. News Best Price Program connects buyers and lease customers with local dealers offering pre-negotiated prices. Buyers save an average of more than $3,000 when they use the program. 

Another excellent way to avoid overpaying on a car, truck, or SUV is to get a great deal upfront. Our new car deals and used car deals pages track the best incentives automakers are offering on both new and certified pre-owned vehicles. 

The U.S. News car insurance hub can help you save money on your auto insurance by helping you find the coverage you need, the cheapest insurance company in your state, and discounts you qualify to receive. When you save money on insurance, you’ll have more to spend chipping away at the balance of your upside-down car loan.



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Inside the Highly Profitable and Secretive World of Payday Lenders

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Illustration by Sarah Maxwell, Folio Art

When Bridget Davis got started in the family’s payday lending business in 1996, there was just one Check ’n Go store in Cincinnati. She says she did it all: customer service, banking duties, even painting walls.

The company had been established two years earlier by her husband, Jared Davis, and was growing rapidly. There were 100 Check ’n Go locations by 1997, when Jared and Bridget (née Byrne) married and traveled the country together looking for more locations to open storefront outlets. They launched another 400 stores in 1998, mostly in strip malls and abandoned gas stations in low-income minority neighborhoods where the payday lending target market abounds. Bridget drove the supply truck and helped select locations and design the store layouts.

But Jared soon fired his wife for committing what may be the ultimate sin in the payday lending business: She forgave a customer’s debt. “A young woman came to pay her $20 interest payment,” Bridget wrote in court documents last year during divorce proceedings from Jared. “I pulled her file, calculated that she had already paid $320 to date on a principle [sic] loan of $100. I told her she was paid in full. [Jared] fired me, stating, ‘We are here to make money, not help customers manage theirs. If you can’t do that, you can’t work here.’ ”

Photograph by Brittany Dexter

It’s a business philosophy that pays well, especially if you’re charging fees and interest rates of 400 percent that can more than triple the amount of the loan in just five months—the typical time most payday borrowers need to repay their debt, says the Pew Charitable Trusts, a nonprofit organization focused on public policy. Cincinnati-based Check ’n Go now operates more than 1,100 locations in 25 states as well as an internet lending service with 24/7 access from the comfort of your own home, according to its website. Since its founding, the company has conducted more than 50 million transactions.

What the website doesn’t say is that many, if not most, of those transactions were for small loans of $50 to $500 to working people trying to scrape by and pay their bills. In most states—including Ohio, until it reformed its payday lending laws in 2019—borrowers typically fork over more than one-third of their paycheck to meet the deadline for repayment, usually in two weeks. To help guarantee repayment, borrowers turn over access to their checking account or deposit a check with the lender. In states that don’t offer protection, customers go back again and again to borrow more money from the same payday lender, typically up to 10 times, driving themselves into a debt trap that can lead to bankruptcy.

Jared and Bridget Davis are embroiled in a nasty court battle related to his 2019 divorce filing in Hamilton County Domestic Relations Court. Thousands of pages of filings and 433 docket entries by April 26 offer the public a rare glimpse into the business operations of Check ’n Go, one of Cincinnati’s largest privately-owned companies, as well as personal lifestyles funded by payday lending.

The company cleared $77 million in profit in 2018, a figure that dipped the following year to $55 million, according to an audit by Deloitte. That drop in revenue may have something to do with the payday lending reform laws and interest rate caps passed recently in Ohio as well as a growing number of other states.


The day-to-day business transactions that provide such profit are a depressing window into how those who live on the edge of financial security are often stuck with few options for improving their situations. If a borrower doesn’t repay or refinance his or her original loan, a lender like Check ’n Go deposits the guarantee check and lets it bounce, causing the borrower to incur charges for the bounced check and eventually lose his or her checking account, says Nick DiNardo, an attorney for the Legal Aid Society of Greater Cincinnati. After two missed payments, payday lenders usually turn over the debt to a collection agency. If the collection agency fails to collect the full amount of the original loan as well as all fees and interest, it goes to court to garnish the borrower’s wages.

That devastating experience is all too familiar to Anthony Smith, a 60-year-old Wyoming resident who says he was laid off from several management positions over a 20-year period. He turned to payday lenders as his credit rating dropped and soon found himself caught in a debt trap that took him years to escape.

Two things happened in 2019, Smith says, that turned around his financial fortunes. First, he found a stable manufacturing job with the Formica Company locally, and then he took his mother’s advice and opened a credit union account. GE Credit Union not only gave him a reasonable loan to pay off his $2,500 debt but also issued him his first credit card in a decade. “I had been a member [of the credit union] for just two months, and I had a credit rating of 520. Can you imagine?” he says. Smith says he is now debt-free for the first time in 10 years.

Consumer advocates say Check ’n Go is one of the biggest payday lending operations in the nation. But knowing its exact ranking is difficult because most payday lending companies, including Check ’n Go and its parent company CNG Holdings, are privately held and reluctant to disclose their finances.

Brothers Jared and David Davis own the majority of the company’s privately held stock. David bought into the company in 1995, but CNG got its game-changing infusion of capital from the brothers’ father, Allen Davis, who retired as CEO of then-Provident Bank in 1998. Allen sold off $37 million in stock options and essentially became CNG’s bank and consultant.

By 2005, however, the sons were part of a public court battle against their father. Allen accused Jared and David of treating his millions in CNG stock as compensation instead of a transfer from his ex-wife (and the brothers’ mother), sticking him with a $13 million tax bill. In turn, the brothers accused Allen of putting his mistress and his yacht captain on the company payroll, taking $1.2 million in fees without board approval, and leading the company into ventures that lost Check ’n Go a lot of money. Several years of legal fighting later, the IRS was still demanding its $13 million. CNG officials did not respond to requests for comment for this story.

Jared and David split $22 million in profit from CNG in 2018 and, according to the Deloitte audit, CNG’s balance sheet showed another $42 million that could be split between the two brothers in 2019. Jared, however, elected not to receive his $21 million distribution “in order to create this artificial financial crisis and shelter millions of dollars from an equitable split between us,” according to Bridget’s divorce filing.

Worse, she claims, Jared said they would be responsible for paying taxes out of their personal accounts rather than from CNG’s company earnings, making her personally responsible for half of the $5.5 million in taxes for 2019. She believes it wasn’t happenstance that $5.5 million was wired to Jared’s private bank account in December of that same year. Bridget has refused to sign the joint tax return, and Jared filed a complaint with the court saying a late tax filing would cost them $1 million in penalties and missed tax opportunities.

“For the duration of our marriage and to the present, Jared has full and complete control of all money paid to us from various investments we have made in addition to our main source of income, CNG,” Bridget wrote in her motion. She suspects that Jared, without her knowledge or consent, plowed the money for their taxes and from other sources of income into Black Diamond Group, the fund that invests in the Agave & Rye restaurant chain. Beyond the original restaurant opened in Covington in 2018, “they have opened four other locations in one year,” she wrote, including Louisville and Lexington. (The ninth location opened in Hamilton this spring.) Agave & Rye’s website touts its Mexican fare as “a chef-inspired take on the standard taco, elevating this simple food into something epic!”

In his response, Jared wrote, “We have very limited regular sources of income.” He says he isn’t receiving any additional distributions from CNG, the couple’s primary source of income, “and this is not within my control. The company has declared that we would not make any further distributions in 2020 given economic circumstances. This decision is based on a formula and is not discretionary.” Agave & Rye helped produce $645,000 in income for Black Diamond in 2020 but has paid out $890,000 in loans, he says. Through August 31, 2020, he wrote, the couple’s “expenses have exceeded income from all sources.”


The divorce case filings start slinging mud when the couple accuses each other of breaking up their 22-year marriage and finding new partners. Jared claims Bridget began an affair during their marriage with Brian Duncan, a contractor she employed through her house flipping business. Bridget, he says, paid Duncan’s company $75,000 in 2018 as well as giving him a personal gift of $70,000 that same year. Jared says she also bought Duncan at least one car and purchased a house for him near hers on Shawnee Run Road for $289,000, then loaned money to Duncan. Jared says Duncan has been late in repaying the note.

While Bridget says Duncan has been drug-free for several years, he has a rap sheet with Hamilton County courts from 2000 to 2017 that runs five pages long. It lists a half-dozen counts of drug abuse and drug possession, including heroin and possession of illegal drug paraphernalia; assaulting a police officer; stealing a Taser from a police officer; criminal damaging while being treated at UC Health; more than a dozen speeding and traffic violations; a half-dozen counts of driving with a suspended license; receiving stolen property; twice fleeing and resisting arrest; three counts of theft; two counts of forgery; and one count for passing bad checks.

Bridget has fired back that Jared not only is hiding his money from her but spending it lavishly on vacations, resorts, and high-end restaurants with his new girlfriend, Susanne Warner. Bridget says Jared gifted Warner with $40,000 without Bridget’s knowledge, then declared it on their joint tax return as a “contribution.” Bridget’s court filings include photocopies of social media posts of Jared and Warner globetrotting from summer 2019 to summer 2020: vacation at Beaver Creek Village in Avon, Colorado; cocktails at High Cotton in Charleston, South Carolina, and dinner at Melvyn’s Restaurant and Lounge in Palm Springs, California; getaways at resorts in Nashville and at a lakefront rental on Norris Lake ($600 per night); in the Bahamas at a Musha Cay private residence ($57,000 per night), at South Beach in Miami, and at a private beach at Fisher Island; in Mexico at Cabo San Lucas; in the U.S. Virgin Islands at Magen’s Bay and on a private yacht ($4,500 per night); in California at Desert Hot Springs, the Ritz-Carlton in Rancho Mirage, and Montage at Laguna Beach; and in the Bahamas at South Cottage ($2,175 per night).

For her part, Bridget has gone through some of the top lawyers in town faster than President Trump during an impeachment—six in all, two of whom she’s sued for malpractice. She sent four binders of evidence to the Ohio Supreme Court, asking for the recusal of Hamilton County Judge Amy Searcy and claiming Searcy was biased because of campaign donations from Jared and his companies. Rather than deal with the list of questions sent to her by Chief Justice Maureen O’Connor, Searcy stepped down. Two other judges have since stepped into the fray, and in March Bridget filed for a change of venue outside of Hamilton County, arguing she can’t get a fair trial in her hometown. At press time, a trial date had been set for June 28 in Hamilton County.

The poor-mouthing in the divorce case has reached heights of comic absurdity. Jared claims he’s “illiquid” because he didn’t get his distribution from CNG in 2019. Bridget has received debt collection notices for the nearly $21,000 owed on her American Express card and a $735 bill from Jewish Hospital. There’s no sign yet that anyone is coming to repossess her Porsche, which according to her filings has a $5,000 monthly payment. Each party has received $25,000 a month in living expenses, an amount later reduced to $15,000 under a temporary legal agreement while the divorce case is being sorted out. Court filings show that Jared’s net worth is almost $206 million and Bridget’s is $22.5 million.


In the early 1990s, Allen Davis was raising eyebrows at Provident Bank (later bought by National City), and not only because of his very unbanker-like look of beard, ponytail, and casual golf wear. He was leading the company into questionable subprime home loans for people with bad credit and a frequent-shopper program for merchants, though the bank’s charter barred him from getting involved in full-blown predatory lending practices. With guidance and funding from his father, Jared, at age 26, launched Check ’n Go in 1994 and became a pioneer in the payday lending industry. Jared and his family saw there were millions of Americans who didn’t have checking or savings accounts (“unbanked”) or an adequate credit rating (“underbanked”) but still needed loans to meet their everyday expenses. What those potential customers did have was a steady paycheck.

Conventional banks share a big part of the blame for the nation’s army of unbanked borrowers by imposing checking account fees and onerous penalties for bounced checks. In 2019, the Federal Deposit Insurance Corporation estimated there were 7.1 million U.S. households without a checking or savings account.

The Davises launched Check ’n Go on the pretext that it would “fill the gap” for people who occasionally needed to borrow money in a hurry—a service for those who couldn’t get a loan any other way. But consumer advocates say the real business model for payday lending isn’t a service at all. The majority of the industry’s revenue comes from repeat business by customers trapped in debt, not from borrowers looking for a quick, one-time fix for their financial troubles.

Ohio’s payday lending lobbyists got a strong hold on the state legislature in the late 1990s, and by 2018 Democratic gubernatorial candidate Richard Cordray could rightfully claim in a campaign ad that “Ohio’s [payday lending] laws are now the worst in the nation. Things have gotten so bad that it is legal to charge 594 percent interest on loans.” His statement was based on a 2014 study by the Pew Charitable Trusts.

The frustration for consumer advocates was that Ohioans had been trying to reform those laws since 2008, when voters overwhelmingly approved a ballot initiative placing a 28 percent cap on the interest of payday loans. But—surprise!—lenders simply registered as mortgage brokers, which enabled them to charge unlimited fees.

The Davis family and five other payday lending companies controlled 90 percent of the market back then, an express gravy train ripping through the poorest communities in Ohio. The predatory feeding frenzy, especially in Ohio’s hard-hit Rust Belt communities, prompted a 2017 column at The Daily Beast titled, “America’s Worst Subprime Lender: Jared Davis vs. Allan Jones?” (Jones is founder and CEO of Tennessee-based Check Into Cash.) In 2016 and 2017, consumer advocates mustered their forces again, and this time they weren’t allowing for loopholes. The Pew Charitable Trusts joined efforts with bipartisan lawmakers and Ohioans for Payday Loan Reform, a statewide coalition of faith, business, local government, and nonprofit organizations. Consumer advocates found a legislative champion in State Rep. Kyle Koehler, a Republican from Springfield.

It no doubt helped reform efforts that former Ohio Speaker of the House Cliff Rosenberger resigned in spring 2018 amid an FBI investigation into his cozy relationship with payday lenders. Rosenberger had taken frequent overseas trips—to destinations including France, Italy, Israel, and China—in the company of payday lending lobbyists. In April 2019, Ohio’s new lending law took effect and, since then, has been called a national model for payday lending reform that balances protections for borrowers, profits for lenders, and access to credit for the poor, according to the Pew Charitable Trusts. New prices in Ohio are three to four times lower for payday loans than before the law. Borrowers now have up to three months to repay their loans with no more than 6 percent of their paycheck. Pew estimates that the cost of borrowing $400 for three months dropped from $450 to $109, saving Ohioans at least $75 million a year. And despite claims that the reforms would eliminate access to credit, lenders currently operate in communities across the state and online. “The bipartisan success shows that if you set fair rules and enforce them, lenders play by them and there’s widespread access to credit,” says Gabe Kravitz, a consumer finance officer at the Pew Charitable Trusts.

Other states like Virginia, Kansas, and Michigan are following Ohio’s lead, Kravitz says. Some states, such as Nebraska, have even capped annual interest on payday loans. As a result, Pew researchers have seen a reduction in the number of storefront lending op­erations across the country. Even better, Kravitz says, there’s no evidence that borrowers are turning instead to online payday lending operations.

Cincinnati is one of five cities chosen for a grant to replicate the success of Boston Builds Credit, an ambitious effort that city launched in 2017 to provide credit counseling in poor and minority communities by training specialists at existing social service agencies. The program also encourages consumer partnerships with credit unions, banks, and insurance companies to offer small, manageable loans that can help the unbanked and underbanked improve their credit ratings. “Right now, local organizations are all kind of working in silos on the problem in Cincinnati,” says Todd Moore of the nonprofit credit counseling agency Trinity Debt Relief. Moore, who applied for the Boston grant, says he’s looking for an agency like United Way or Strive Cincinnati to lead the effort here.

Anthony Smith is thankful that he’s escaped the downward spiral of his payday loans, especially during the pandemic’s economic turmoil. “I’m blessed for every day I can get paid and have a job during these difficult times, just to be able to pay my bills and meet my responsibilities,” he says. “I’ve always kept a job, but until now I’ve had crappy credit. That doesn’t mean I’m a bad guy.”

Can others worth millions of dollars say the same?

Inside the Highly Profitable and Secretive World of Payday Lenders Source link Inside the Highly Profitable and Secretive World of Payday Lenders



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What’s Questionable Credit and Can I Get a Car Loan With It?

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Questionable’s definition means that something’s quality is up for debate. If a lender says that your credit score is questionable, it’s likely that they mean it’s poor, or at the very least, they’re hesitant to approve you for vehicle financing. Here’s what most lenders consider questionable credit, and what auto loan options you may have.

Questionable Credit and Auto Lenders

Many auto lenders may consider questionable credit as a borrower with a credit score below 660. The credit score tiers as sorted by Experian the national credit bureau, are:

  • Super prime: 850 to 781
  • Prime: 780 to 661
  • Nonprime: 660 to 601
  • Subprime: 600 to 501
  • Deep subprime: 500 to 300

The nonprime credit tiers and below is when you start to get into bad credit territory and may struggle to meet the credit score requirements of traditional auto lenders.

This is because lenders are looking at your creditworthiness – your perceived ability to repay loans based on the information in your credit reports. Besides your actual credit score, there may be situations where the items in your credit reports are what’s making a lender question whether you’re a good candidate for an auto loan. These can include:

  • A past or active bankruptcy
  • A past or recent vehicle repossession
  • Recent missed/late payments
  • High credit card balances
  • No credit history

There are ways to get into an auto loan with questionable credit. Your options can change depending on what’s making your credit history questionable, though.

Questionable Credit Auto Loans

If your credit score is less than stellar, it may be time to look at these two lending options:

  • What Is Questionable Credit and Can I Get a Car Loan With It?Subprime financing – Done through special finance dealerships by third-party subprime lenders. These lenders can often assist with many unique credit situations, provided you can meet their requirements. A great option for new borrowers with thin files, situational bad credit, or consumers with older negative marks.
  • In-house financing – May not require a credit check, and is done through buy here pay here (BHPH) dealers. Typically, your income and down payment amount are the most important parts of eligibility. Auto loans without a credit check may not allow for credit repair and may come with a higher-than-average interest rate.

Both of these car loan options are typically available to borrowers with credit challenges. However, if you have more recent, serious delinquencies on your credit reports, a BHPH dealer may be for you. Most traditional and subprime lenders typically don’t approve financing for borrowers with a dismissed bankruptcy, a repossession less than a year old, or borrowers with multiple, recent missed/late payments.

Requirements of Bad Credit Car Loans

In many cases, your income and down payment size are the biggest factors in your overall eligibility for bad credit auto loans. Expect to need:

  • 30 days of recent computer-generated check stubs to prove you have around $1,500 to $2,500 of monthly gross income. Borrowers without W-2 income may need two to three years of professionally prepared tax returns.
  • A down payment of at least $1,000 or 10% of the vehicle’s selling price. BHPH dealers may require up to 20% of the car’s selling price.
  • Proof of residency in the form of a recent utility bill in your name.
  • Proof of a working phone (no prepaid phones), proven with a recent phone bill in your name.
  • A list of five to eight personal references with name, phone number, and address.
  • Valid driver’s license with the correct address, can’t be revoked, expired, or suspended.

Depending on your individual situation, you may need fewer or more items to apply for a bad credit auto loan. However, preparing these documents before you head to a dealership can speed up the process!

Ready to Get on the Road?

With questionable credit, finding a dealership that’s able to assist you with an auto loan is easier said than done. Here at Auto Credit Express, we want to get that done for you with our coast-to-coast network of special finance dealerships.

Complete our free auto loan request form and we’ll get right to work looking for a dealer in your local area that can assist with many tough credit situations.

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Entrepreneur Tae Lee Finds Her Fortune

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By Jasmine Shaw
For The Birmingham Times

Birmingham native Tae Lee had plans last year to visit the continent of Africa, the South American country of Columbia, and the U.S. state of Texas.

“I was going to stay in each place for like four to six weeks, and then COVID-19 happened,” she said. “So, I just was like, ‘You know what, I’m just gonna go to Mexico and stay for six months.’”

Once home from Playa Del Carmen, located on Mexico’s Yucatán Peninsula, the 33-year-old entrepreneur put the final touches on “Game of Fortune: Win in Wealth or Lose in Debt,” a financial literacy card game for ages 10 and up.

“We created ‘Game of Fortune’ because we realized there was a gap in learning the fundamentals of money,” said Lee. “We go through life not knowing anything about money and then—‘Bam!’—real life hits. Credit, debt, and bills come at us quick!”

Lee believes the game “gives players a glimpse of real life” by using everyday scenarios to teach them how to make wiser financial decisions without having to waste their own money.

“I feel like [financial literacy] can be learned in ways other than somebody standing up and preaching it to you over and over again,” she said. “You can learn it in ways that are considered fun, as well.”

Which is why “we want the schools to buy it, so we can give students a fun way to learn about financial literacy,” she added.

Lee, also called the “Money Maximizer,” is an international best-selling financial author, speaker, coach, and trainer who is known for her financial literacy books, including “Never Go Broke (NGB): An Entrepreneur’s Guide to Money and Freedom” and the “NGB Money Success Planner High School Edition.” The Birmingham-based financial guru focuses on creating diverse streams of income in the tax, real estate, insurance, and finance industries.

For Lee, it’s about building generational wealth, not debt.

Indispensable Lessons

Lee got her first glance at entrepreneurial life as a child watching her mother, Valeria Robinson, run her commercial cleaning company, V’s Cleaning. Robinson retired in 2019.

“My grandmother had a cleaning service, too,” said Lee. “So, even though I didn’t start out as an entrepreneur, watching my mom and grandma do it taught me a lot.”

Lee grew up in Birmingham and attended Riley Elementary School, Midfield Middle School, and Huffman High School. She then went on to Jacksonville State University, in Jacksonville, Alabama, where she earned bachelor’s degree in physical education. She struggled to find a career in her field and became overwhelmed by student loans.

“My credit and stuff didn’t get bad until after college,” she said. “I was going through school and taking money, but nobody told me, ‘Oh, you’re gonna have to pay all of this back.’”

Before embarking on her extensive career in money management, Lee had not learned the indispensable lessons that she now shares with clients.

“‘Don’t have bad credit.’ That’s all I learned,” she remembers. “Financial literacy just wasn’t taught much. I learned the majority of my lessons as I aged.”

In an effort to ward off collection calls and raise her credit score, Lee researched tactics to strategically eliminate her debt.

“I knew I had to pay bills on time, and I couldn’t be late with payments,” she said.

Lee eventually began helping friends revamp their finances and opened NGB Inc. in 2017 to share fun, educational methods to help her clients build solid financial foundations.

“People were always coming to me like, ‘How do I invest in this?’ and ‘How do I do that?’ So, I said to myself, ‘You know what, people should be paying to pick your brain.’”

Legacy Building

While Lee enjoyed watching her clients reach milestones, like buying a new car with cash or making their first stock market investment, she was also designing “Game of Fortune” to teach the value of legacy building.

“The game gives players the knowledge to build generational wealth, not generational debt,” she said. “It gives you a glimpse of life, money, and what can truly happen if you mismanage your coins.”

Using index cards to create her first “Game of Fortune” sample deck, Lee filled each card with pertinent terms related to debt elimination and credit and wealth building. She then called on a few friends to help her work through the kinks.

Three of her good friends—Barbara Bratton, Daña Brown, and Sha Cannon—were just a few of the people that gave feedback on the sample deck.

“From there I met with Brandon Brooks, [owner of the Birmingham-based Brooks Realty Investments LLC], and four other financial advisors to fine-tune the definitions and game logistics,” Lee said.

Though Lee was unable to land a job in physical education after graduating from college, she now sees her career with NGB Inc. as life’s unexpected opportunity to teach on her own terms.

“Bartending and waitressing taught me that working for someone else was not for me,” she replied. “In order to get the life I always wanted, I had to create my own business.”

In her entrepreneurial pursuits, Lee strives to be an open-minded leader who embraces the need for flexibility.

“COVID-19 has shown me that in entrepreneurship you have to maneuver,” she said. “When life changes, sometimes your business will, too. You may have to change the path, but your ending goal can be the same.”

“Game of Fortune: Win in Wealth or Lose in Debt” is available and sold only on the “Game of Fortune” website: gameoffortune.money. To learn more about Tae Lee and Never Go Broke Inc., visit taelee.money and nevergobroke.money or email tae@taelee.money; you also can follow her on Facebook (https://www.facebook.com/nevergobrokeinc) and Instagram (@nevergobrokeinc).

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