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20 Percent of Auto Title Loan Borrowers Lose Their Vehicles: CFPB

May 20th, 2016 · No Comments · PayDay Loans

by Staff

20 percent auto title loan borrowers lose their vehiclesIt’s official. Auto title loans are just as bad as we thought, if not worse. According to a new report from the Consumer Financial Protection Bureau (CFPB), 20 percent of auto title loan borrowers on single-payment plans have their vehicles seized because they cannot pay them back, leaving them deep in debt and in need of credit repair. Don’t let this happen to you.

About the Study

The CFPB looked at 3.5 million single-payment auto title loan records between 2010 and 2013.

Single-payment auto title loans typically last for 30 days. Borrowers are then expected to pay back the entire loan, plus interest, in one single payment. Unfortunately, the typical loan is $700 with an annual percentage rate of a whopping 300 hundred percent!

Paying this back proves to be an impossible task for most, which is why the majority of borrowers have to reborrow instead, or lose the titles to their vehicles.

Here’s what we know about these single-payment auto title loans:

  • 1 in 5 borrowers have their vehicles seized because they cannot pay back the loan
  • 4 in 5 borrowers have to reborrow on the same day the loan is due
  • More than 2/3 of auto title loan business is generated by borrowers have take out 7 or more consecutive loans, spanning the better part of the year

What all of this adds up to is borrowing a few hundred dollars at a cost of thousands.

Auto Title Loan Availability

Not all states allow auto title loans, and some that do have such tight restrictions that lenders don’t care to do business there (e.g., capped interest rates).

The CFPB says 20 states allow these single-payment auto title loans. And five states require that lenders extend auto title loans on an installment plan basis.

Learn more about auto title loans.