Advertisements for auto title loans often conceal the fact that the product may carry annualized interest of 300 percent or more. While the commercials encourage cash-strapped consumers to borrow against their cars, they fail to point out that one of the risks is that customers could lose their vehicles.
One single mother in Cleveland took out a car title loan of $1,500 but could not repay the debt within 30 days, forcing her to renew the loans each month and pay new fees to extend the due date. She ultimately forked out more than $2,000 in fees and still owed $1,700 before retaining a legal-aid attorney to help broker an agreement with the lender.
State Rep. Matt Lundy (D-Elyria) is trying to muster support to keep auto title lenders from gaining a bigger foothold in Ohio. He noted that the legislature has shown little interest in closing the loopholes that payday lenders use. He says the stakes are higher with title lending, since consumers are putting their cars on the line.
Although not widely advertised, there are low-cost alternatives to storefront title loans. Most credit unions in Ohio offer loans against borrowers' paid-off cars for a fraction of what a storefront loan would cost. For example, Faith Community United Credit Union offers loans for as little as 7 percent. CEO Jacqueline Moore said she still tries to find borrowers a less-risky alternative, and is hearing more frequently from customers who fall into debt from title loans.