Driven to Disaster: Car-Title Lending and Its Impact on Consumers

Published: February 28, 2013

Joint research from CRL and the Consumer Federation of America finds that car-title loans—small-dollar loans secured by the title to a vehicle owned outright—cost U.S. consumers $3.6 billion a year in interest on $1.6 billion in loans.

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These products share many of payday loans’ predatory features: triple-digit interest rates, balloon payments at the end of the loan’s term, and—critically—a failure by the lender to evaluate a borrower’s ability to repay. Car-title loans also produce the same effect that payday loans do: A debt trap that leaves too many borrowers worse off than when they started.

Key findings:

  • Approximately 7,730 car title lenders operate in 21 states costing borrowers $3.6 billion in interest on $1.6 billion in loans.
  • The average car-title borrower renews a loan eight times, paying $2,142 in interest for $951 of credit.
  • A typical borrower receives cash equal to only 26 percent of a car’s value, yet pays 300% APR.