The Center for Responsible Lending and The Consumer Federation of America released this joint paper, updating their 2005 report on the high cost of auto-title lending.
Key points:
- Approximately 7,730 car-title lenders operate in at least 21 states costing borrowers $3.6 billion each year 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 in credit.
- Car-title loans’ annualized percentage rates (APR) are especially excessive considering the value of the collateral and the relatively low amount of the loan. In our borrower-level data set, the median loan-to-value ratio was 26 percent, yet the APR was 300 percent.
- One in six borrowers in our data set faced repossession, with repossession fees averaging half of the borrower’s outstanding loan balance.