What are the problems with car title loans?
Car title lenders tell customers about loan fees that really amount to triple digit interest that can run as high as 300% or more.
The short length of a title loan, often only 30 days, requires borrowers to pay principal and interest in a single payment. These terms make it difficult for borrowers to fully repay and the result is a cycle of debt that is harder to retire with each renewal.
When borrowers can no longer afford mounting interest due, the lender takes possession of the vehicle. The borrower is then left with new and even more difficult problems in daily living.
“The ABC15 Investigators took each location of a licensed title loan business and plotted them on a map. We found high concentrations in areas with high poverty rates according to the most recent census data."
–Joe Ducey, ABC 15 Investigative Reporter, Phoenix, AZ, July 2011
“Is there a legitimate business in our nation today which might be able to charge a 300% annualized rate of interest? Well, I guess that would depend on how one defines legitimate. I think it would be safe to say that if you are doing business with somebody who charges a 300% annualized rate of interest, you would want to be VERY CAREFUL. What type of business has got these kinds of rates? Car title loans.”
--Larry Doyle, Business Insider Columnist, July 2011
“Car-title loans, which allow you to borrow against the value of your vehicle, are such bad deals that more than half of the states, including Maryland, basically don't allow them. “Yet consumer protections are only as strong as the weakest laws in neighboring states. Even if one state bans the loans, its residents can drive across the state line and borrow at whatever loan terms are allowed there.”
–Eileen Ambrose, Reporter with The Baltimore Sun, February 2011