Sunday, April 11, 1999
The man sitting before Clifford Jones had come to him several times before, to bury loved ones. But this time, the man wanted a loan. He needed $ 2,800 to fix the transmission on the car he depended on to get to and from work.
“You know I’m good for it, too,” the man told James, a co-owner of Harlem’s Unity Funeral Chapel.
“How could you turn down someone who trusted you with their loved ones?” James asked. And so he not only arranged for the man to get the loan, but to pay it back over six months without interest.
This is a bit unusual, of course, and not something many people could arrange – but it demonstrates one of the many solutions that could help someone in a sudden financial bind that requires a quick infusion of cash.
Swallow your pride
Whatever is driving your money needs, it’s smart to recognize that no choice is easy, and all likely have both advantages and disadvantages. The range of options run from very good and advisable to pretty awful.
You could certainly seek out your funeral director or pastor, sell jewelry or a family heirloom, get a cash advance on your credit card, even borrow from your employer or against your retirement accounts. But it’s never wise to drop in on your neighborhood loan shark.
That person, said Erroll Louis, a business consultant who was co-founder and former manager of a Brooklyn credit union, is no longer the trench-coat clad thug with a broken nose.
She just might be the kindly old lady down the block who’ll give you the loan – but with not enough time to pay it off and at 150% interest – with friends to enforce the terms.
“The first thing to do is not jump off a cliff, or dig a deeper hole in order to get out of the one you are in,” Louis said. “The idea is to get creative quickly and realize the first option is not always the best.”
The only ways to raise cash quickly is either to borrow or sell something with hard cash value.
Louis said he advises those in need to swallow their pride and call a friend or family member. They might just have enough to spare for a while, or know someone who does, without the onerous conditions that other options come with.
But be aware that owing money to someone you know can quickly put a strain on that relationship. You should weigh that cost before making your request.
Sell your jewels, not your wheels
If a person has a family heirloom or valuable jewelry he or she is willing to part with, it could be sold to one of the many high-end jewelry resalers in New York City.
Paul Lubetsky, owner of Windsow Jewelers on Fifth Avenue, said furniture, clothing or electronics equipment probably won’t fetch much of a return because that type of merchandise has only about a 5% resale value.
You could sell your car, but you probably need it to get around, making jewelry a better option to get your hands on quick dough.
“For example, a Rolex watch that’s in good condition could be worth 40% to 50% of its retail value to us,” Lubetsky said. “If a piece is signed, like Cartier, Tiffany or Bulgari, we would purchase it at a large percentage above its intrinsic value because there is a high demand in the second-hand market.Also, anything that’s antique would go for a large amount above its intrinsic value, sometimes as much as 20 times.”
Another option is to go to a pawn broker, an industry that has been working overtime to clean up its image and, in recent years, has come under tighter state regulations.
Alan Wohlgemuth, manager of Century Pawnbrokers at 725 Eighth Ave., said state law bars his store from buying merchandise. He could only take the item people bring in as collateral for a loan, for which he can only charge 3%, plus a small monthly storage fee.
One advantage in this type of transaction is that there is usually no credit check.
“Usually you leave a diamond or some other jewelry and walk out of the store with the cash and ticket that is good for four months,” Wohlgemuth said.
Hidden costs of quick loans
“Borrower beware” should be the guiding principle of someone who wants to look into a home equity loan, refinancing or a second mortgage on a property, said Sarah Ludwig, executive director of the Neighborhood Economic Development Advocacy Project – which works with groups in neighborhoods underserved by the city’s largest financial institutions.
The problem with going to a commercial lender like the Money Store, or answering any of the mailings that tend to flood some communities, as she sees it, is that there are a lot of hidden fees that could drive up the cost of borrowing and make one’s financial situation even worse.
“What people don’t understand is that there are tons of fees upfront and during the life of the loan. If you are going to refinance to get a small loan, do your homework,” Ludwig said.
The cost of taking this step without being aware of the responsibilities is great, since a home is often the single greatest asset anyone has. Mess up and you could end up homeless and in greater debt than you started with.
One of the quickest ways to free up cash is to get an advance from your credit card, said Paul Quinn, a Chase Manhattan Bank senior vice president for personal credit services. The cash comes quickly, sometimes in just a few moments at an automated teller machine. But the interest rates can be sky-high. Also, something to keep in mind: credit card companies exist to keep you in debt.
“If it is a longer-term need, you need to think about an installment loan that you could take 12 to 60 months to pay back,” Quinn said.
And the annual interest rate on this transaction could range from 10.99%, if you already have an account with Chase and are willing to let the bank deduct the payment directly from your account, to 12.99% if you have good credit but no relationship with the bank.
Of course, many credit cards charge north of 20%, so know the terms before you’re obligating yourself to heavy duty interest payments.
Quinn said, however, that a credit union would offer rates on a personal loan that are very competitive with those of banks.
Some people might chose to borrow from a retirement account such as an IRA or 401(k) plan. There are some rules that must be met to qualify, but the one significant advantage is that the interest that you pay back on such a loan typically goes into your own account – meaning you’re paying the interest back to yourself.
“Those type of borrowings are excellent for someone looking to pay off a credit card debt,” Quinn said.
But such gambits scare Erroll Louis, the former credit union manager.
“To me, this is almost the same as selling off your future,” he said. “You may in fact be delaying your retirement by as long as five years.”
GRAPHIC: Christoph Hitz illustrations
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