Consumers Warned Against Loans Secured With Auto Titles

These loans are often more costly than borrowers expect

Consumers Warned Against Loans Secured With Auto Titles
May 19, 2016

Borrowers in need of assistance between paychecks often look to various types of payday loans. One of these types of loans is called a single-payment loan, and it is secured with the borrower’s auto title. However, as with all payday loans, this type of loan often had unexpected consequences that went along with it. According to the Consumer Financial Protection Bureau (CFPB), an auto title loan can have an interest rate of 300 percent or more, and if the borrower fails to repay it on time, the company may seize their vehicle. A study of those who make use of these loans revealed a number of alarming statistics:

  • A large majority of borrowers cannot meet the repayment deadline and choose to extend the deadline, which results in more fees and a higher amount of interest to repay.
  • One out of every five borrowers ends up losing their vehicle because they are unable to pay back the loan.
  • Two-thirds of all borrowers who take out auto title loans have been in debt for at least seven months.

Defaulting on one of these loans can have a cascading effect on a borrower, said the director of the CFPB, Richard Cordray. It greatly impacts the borrower’s mobility and can make it difficult for them to go to work, go shopping, or make doctor’s appointments.

Because of this, federal regulators are considering a number of new regulations for all types of payday loans.

If you are interested in a personal loan, visit our curated list of top lenders.

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Carla Truett | 05.19.16 @ 17:02
I have never borrowed against any of my vehicles. I know several who have done this and a couple that have lost them.
Erin | 05.19.16 @ 17:03
It's disgusting the number of ways people will find to take advantage of someone when they are desperate. If you need the money that badly, though, your choices are often limited.
Steffanie | 05.19.16 @ 17:04
Not sure why you would want to borrow against your vehicle. I hope to never be that desperate.
Irene | 05.19.16 @ 17:04
Wow, I hadn't heard about this at all.
Nancy | 05.19.16 @ 17:04
I rank these loans with payday loans. They seem to prey on the people's desperation and harm the people who can't afford to be hurt anymore.
Alec | 05.19.16 @ 17:06
I would never borrow against my car. I'd find some other way. If you lose your car, chances are you lose your job and risk being unable to find anything else! These types of loans should be illegal or have some sort of limit to protect the people who are desperate enough to use them.
brittany.martinez530 | 05.19.16 @ 17:08
I didn't even know that you could borrow against your car, but even knowing that now, it's not something I would be comfortable doing.
$commenter.renderDisplayableName() | 12.10.16 @ 20:59
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