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.
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