Texas Car Title Loan Business Profits

How to Start a Texas Car Title Loan Business

You want to learn how to start a car title loan business? Read on…

According to The Texas Star Telegram, the typical Texas household is $40,000 in debt. They don’t make it clear whether this includes all Texas home loan mortgage debt; stupid.

The one thing that is clear is that Texas car title loan borrowers paid $360,000,000 in car title loan fees and interest last year. [Note: That’s an increase of $52,000,000 from the previous year. Car title loan lending is good!] This information was disclosed by the OCCC; the Texas regulatory agency for car title loan and payday loan stores and internet lenders.

Why would Texans spend this kind of money on car title loans? Because there is no where else to turn to in times of financial duress. Many Texans, like residents of California, Georgia, Arizona, Louisiana… would rather borrow from a car title loan lender for a few months than beg for help from their employer, family or friends. Why?

  • Car title loans are quick and easy
  • To qualify, you need to prove you can pay back the money and you have a car, RV, motorcycle… with a clear title. That means, no lien holder.
  • That’s right! Cars, RV’s, motorcycles, boats… all possible collateral for a title loan
  • Car title loan transactions are private
Title Loan Business

Title Loan Business

Critics of car title loan lenders are everywhere. Of course, they rarely experience “hard times” since the majority of these folks work for the government or a so-called consumer protection agency. A great example of this is the Consumers for Irresponsible Lending. [Just kidding; it’s the CRL.]

On the other hand, many consumers for car title loans work for the U.S. Post Office, the Department of Motor Vehicles, local hospitals, etc.

And of course, we have our “outlier’s.” Those consumers and lenders who push everything to the limit and place all financial service products to the point of over-regulaion! Not a day goes by that you don’t read some horror story about a poor, mistreated borrower whose car is repossessed or a car title lender who simply goes over the line of human decency because of greed.

As operators and consultants in the car title loan industry, we can report that the actual number of vehicles we repossessed are less than 3 in 100 funded title loans. In those few circumstances, we called, sent several text messages and letters to the borrowers in an attempt to get them to talk to us. Failing these measures, we simply picked up the phone, called our friendly repossessor and reported the vehicle plate and vehicle identification number to them. Within the week, the license plate scanner [LPS] company got a “hit” and our repossessor picked up the car having the title loan in a Wal-Mart parking lot.

Our car title loan repossessor delivered the vehicle to the Anaheim, Calif Manheim auto auction. There, the vehicle was reconditioned and “run” through the car auction. A week later we received our check from the auction house. We deducted the fees, interest, late charges and storage costs from the amount we received from the auction and sent the balance to our car title loan borrower’s last known address. [Note: This check was cashed :-)]

Car title loan lenders DO NOT WANT YOUR CAR! We just want our money. The fees are clearly explained AND posted on our websites and in the case of store-fronts, on the interior walls of the store.

Here’s an example of the fees we charge for a car title loan:

  • Vehicle “low book value” is $8000.
  • Borrower wanted $3000 for 30 days.
  • We charged her $180 in fees plus a $35 DMV fee.
  • That’s it!
  • Yeah, sure. Extrapolated over 365 days that’s 180%+ APR. So… if the borrower doesn’t like it, no one is forcing her to borrow the cash. Try your local bank. It would cost them $500+ just to do the paper work AND they will not offer these types of loans.

Is this loan predatory? We don’t think so. But it’s a bit like pornography. I can’t tell you for sure but I know it when I see it. In Texas, California, Georgia, Arizona… it’s legal. And for MANY Texan’s, this car title loan appears to be reasonable.

Start your own car title loan business. Get our “How to Start a Car Title Loan Business Manual” now; delivered immediately into your email inbox.

Click HERE to get started. Buy Now.


Car Title Loan Marketing Ideas

Marketing Ideas. By the guys who wrote the book on starting a payday loan, installment and  title loan business.

What’s a payday, installment, title loan lender to do? How do you get more customers? Google? Facebook? Instagram? Pinterest? Blogs, Direct mail? Yellow Pages Online? Buy leads? Billboards? What REALLY works? Acheiving success in increasing your loan portfolio size is a Pain in the ASS! A SLOW, long-term process.

It’s the simple stuff that works!

For our loan stores, we do use Google PPC and Bing but VERY localized (zip codes, city, county…) because the general PDL phrases are simply too expensive and poorly convert. Also, the lead gen companies have the time/expertise to FOCUS on this.

Storefront lenders must have a website that looks great on a phone! THIS IS ABSOLUTELY NECESSARY TODAY! 70% of the traffic coming to our websites are from a customer on their smart phone. We’re not trying to get apps completed on the smart phone but it does happen occasionally. Our #1 goal is to provide a customer with store directions via Google Maps, consumer visits and inbound phone calls with a formal appointment setup and then a call back to the customer before (reminders) and after the appointment (feedback). ALWAYS BE ASKING THE POTENTIAL CUSTOMER FOR THE APPOINTMENT!

Marketing? Our stores primarily do a lot of:

  • Local direct mail
  • Door hangars
  • Car wraps
  • Answer the damn phone! And do it right!! “How did you hear about us?”  [Understaffed? After hours?Use the experts at Centrinex discussed on a previous Post.]
  • Sign spinners
  • Community outreach
  • Billboards
  • Bandit signs [Yeah sure, check your city code enforcement. Or just do it and ask for forgiveness.]
  • Referral programs with businesses that service our demographic and need to be made aware of how we can help the merchant make more money. I’m referring to lawyers, bail bondsman, mechanics, Aamco transmission, brake shops, tire and rim companies, other PDL/title loan stores that employ different loan criteria or don’t service the same loan areas we do, tax preparers… GET CREATIVE!

WE ARE FOCUSED on determining who provided the referral and to pay them for it SOON IN CASH!! This makes a HUGE difference in regularity, quality and quantity of referrals! Of course, referrals from existing customers are treated with the same diligence and rewards. (And they are probably the most valuable leads we can get!) Your loan management software can be a BIG HELP with this process! [Does YOUR LMS offer many features enabling this “tagging” or are they weak? Do you even know?  This feature is a MUST today! Want to know which software companies we like and why? Most are TERRIBLE! Click Here]

Car Title Loan Advertising IdeaI used to own some Enterprise franchises. Rain or shine, a pretty girl or handsome face showed up at body shops – one of our target markets – REGULARLY with donuts, biz cards, pens, … THIS WORKS! Over and over again. Week in and week out! You must be manic about getting out from behind your desk and visiting these merchants in the field! Develop a script to briefly describe your business, why it’s good for the merchant and for the merchant’s customer. Then MAKE SURE you’re company does not do ANYTHING to make this merchant’s life more difficult because of your PDL/Title/Installment company’s actions!

I’ve ALWAYS thought the owner of the PDL/TITLE/INSTALLMENT store should personally do this at least one day every month! The owner has to get out in the field. Visit these potential referral businesses! Ask open ended questions! How is the business owner doing? How’s business? What are her/his challenges today? How can my business help this merchant? What’s working for them to increase THEIR sales revenue? What isn’t? Can we stay in touch? Additionally, assign employees to visit these merchants as well – every week on a formal schedule. Some of your employees will embrace this. Others will rebel. Role playing BEFORE in practice sessions with your Team will help prepare them for this. With time and effort, they will get better and yield referrals. CONSISTENCY is crucial!

Conduct a formal review of these visits immediately after returning from these field visits! Develop a check list and comments section. Who did your Team meet with? Their role? What was said? Outcome? Follow-up? Measure results.

Pick up a dozen donuts and just do it! Weekly!! No excuses!!! It’s about sales!!!! Document this strategy; hopefully with your loan management software!!!!! Repeat. Rinse. Do it again.

For most of us this is HARD! What do you say to the merchant? What’s your opening line? What if the merchant is busy? “I’m here to help us both make more money without burdening you with more hassles!” And don’t overlook any of the merchant’s employees who are present. You tell a Bail Bondsman’s office personnel that there’s cash available for referrals, THEY WILL SEND YOU CUSTOMERS! We have a car tire rim installer at a local tire/rim company who sends us 3-5 new clients every month. We have a stereo installer at a car stereo joint that sends us 2 – 6 new borowers every month! Susan, a car title lender in Los Angeles is using an inflatable character in front of her store to drum-up more business. This is working for her! People even have their pictures taken with it and post them on Facebook and Instagram. [If she picks up just one new customer a month with this approach, how much $$ in revenue will she earn over the life-time of this borrower? $1000? $5,000? $10,000? More?And from this borrower’s friends and family – referrals?]

You  know none of this is rocket science! Just good old Guerilla Marketing with a manic obsession!
Jer – Trihouse 702-208-6736 Comments? Questions? Share what’s working for you!!


Arizona Car Title Loan Lenders in CFPB Trouble

Title Loan Lenders Failed to Disclose APR’s

For car title loan lenders, it’s always been a “best practice” to fully disclose APR’s. It’s not enough to simply advertise car title loan rates! Title loan lenders MUST fully disclose – in layman’s terms – corresponding Annual Percentage Rates [APR].

This is nothing new! TILA has played a dominant role in lending since the beginning of time.

There has not been a single OLA, CFSA, FISCA or state industry conference that failed to address TILA issues since 1998 when I attended my first conference. One lawyer after another has conducted “workshops” imploring all lenders to pay attention to this issue.

So suddenly the CFPB makes an announcement that 5 Arizona car title loan lenders failed to disclose their loan APR’s on their website?

SIMPLY ASTOUNDING! We’re talking about these failures having occurred from July, 2016 onward! CRAZY! Who are these fools?

  • Auto Cash Leasing [founded 1999]
  • Interstate Lending [2005]
  • Oasis Title Loans [2013]
  • Phoenix Title Loans [2013]
  • Presto Auto Loans [2002]

The CFPB accuses these car title loan lenders of advertising a monthly interest rate but failed to state the annual APR.Annother lender is accused of forcing title loan borrowers to multiply the lenders advertised interest rate by 12! [Are you kidding me??]

Start Car Title Loan BusinessTo be fair, these 5 Arizona title loan lenders have not yet been found guilty in a court of law. Nor have they reached a settlement.

But you gotta know even the bureaucrats at the CFPB know how to take a screen shot of a title lender’s website. At least the interns do. Unless they’re kept busy doing other things.

Man, this is “Outer Limits” stuff. Too young to remember the TV show, “Outer Limits?” Too bad… great show!


Typical Car Title Loan Business Profits

Beginning car title loan lenders often ask about typical title loan borrower repayment schedules. Based on over 30,000 title loans over the past 3 years, here’s the average breakdown. Of course, if you’ve been a title loan lender for a while, your car title loan software should reveal your actual statistics.
Car Title Loan Business Statistics Basically, car title loan borrowers repayment schedules breakdown like this:

  • 3 borrowers in 10 pay off their title loan in full within 30 days
  • 1 borower in 10 will renew their title loan 1 time before paying off their loan in full
  • 1.5 borrowers in 10 will renew their car title loan 2 to 4 times before paying off their title loan in full
  • 4.5 title loan borrowers will renew their car title loan 5 or more times or will NEVER pay off their loan.

Needless to say, the title loan business can be very profitable.

Add other revenue streams [Insurance, tax preparation, DMV services…] to your product offerings and you can make some serious MONEY!


Utah Car Title Loans: Laws

Utah Title Lending Registration Act Chapter 24

General Provisions 7-24-101 Title.

This chapter is known as the “Title Lending Registration Act.”

7-24-102 Definitions.
As used in this chapter:
(1) “Nationwide database” means the Nationwide Mortgage Licensing System and Registry,
authorized under 12 U.S.C. Sec. 5101 for federal licensing of mortgage loan originators.
(2) “Rollover” means the extension or renewal of the term of a title loan.
(a) “Title lender” means a person that extends a title loan.
(b) “Title lender” includes a person that:
(i) arranges a title loan on behalf of a title lender;
(ii) acts as an agent for a title lender; or
(iii) assists a title lender in the extension of a title loan.
(a) “Title loan” means a loan secured by the title to Continue Reading..


Car Title Loan Checklist

When you’re running a car title loan business it’s critical to use a “Car Title Loan Valuation Checklist” to systematically place a value on the car title BEFORE you fund the title loan.

Title loan valuation checklists don’t have to be complicated. Just the basics in addition to a few pictures.

Title loan pictures should include the “Vehicle Identification Number” [VIN], the mileage and various angles of the car. [LF Front, RT Front, Rear, Front, License Plates…]

Car Title Loan Collateral Valuation Checklist

Car Title Loan Collateral Valuation Checklist

If you’d like a version of this “Car Title Loan Collateral Evaluation Checklist,” just email us at . For a step-by-step guide to starting or improving your own title loan business go here: “Title Loan Startup Manual.”

Once you have completed this checklist, we’ll show you how to determine the maximum LTV – loan to value – to offer your customer. There are several free tools…Vehicle-collateral-title-loan-checklist-V4-lrg



Title Loans on Mobile Homes

Can a car title loan lender make a title loan on a mobile home?

Here’s an interesting Mississippi court case that provides specific insight as to whether a title loan company can provide loans on mobile homes. From the Case:

title loan on mobile home

Title loan on mobile home

“Based on the Debtor’s testimony, the Court finds that Laird led her to believe she was entering into a $2,500.00 title loan with Franklin Check Service. Indeed, Laird admitted at Trial that he initially discussed a $2,500.00 title loan with the Debtor. From his conversation with the Banking Department, Laird knew that Franklin Check Service could lose its title loan license if it granted a title loan on a mobile home and he also knew that he could not grant the Debtor a title loan himself, so he transformed the title loan transaction to a purported sale to circumvent Mississippi law.[12] It was reasonable for the Debtor to believe that she was agreeing to a titleloan with Franklin Check Service because her conversations with Laird and Delozier took place at its office, Laird was its sole owner, and Delozier was its sole employee. Also, providing Laird with the Certificate of Title was just as consistent with a titleloan as with a sale.[13] More significantly, the Court does not believe that the Debtor would have agreed to sell her mobile home for $2,500.00 when she had purchased it only five (5) months earlier for $8,700.00, had made repairs to the interior, and had no other place to live. Indeed, the $2,500.00 purchase price paid by Laird’s Body Shop is less than thirty percent (30%) of the amount the Debtor paid for the mobile home.[14] In comparison, thirty percent (30%) is within the typical percentage range that a title lender will loan. Taming Title Loans, 101 VA. L. REV. 1753, 1756-57 (2015).”

Here’s a link to the facts, the view of the Mississippi Banking Department and the ultimate disposition of this case:

Title Loans on Mobile Homes Link


Cheap Website Content for Payday and Title Loan Lenders

Fast, cheap website content!

By: Trihouse Consulting.

Need good 500 word payday loan and title loan articles for $5.00? NeedArticles
As lenders and and website owners, we all have the same challenge:

How Do I Create Good Content for My Website?

  • I need it Fast.
  • I need good content Regularly
  • I don’t have Time
  • I need it Cheap

Read on for the solution to your website content problem…

So… Google blew up their PPC [pay-per-click] program that all the “big boys” depended on to drive borrowers to their websites. No biggie! For the average payday loan or car title lender, Google’s PPC program has been too expensive for us to play-in anyway.

  • Clicks we’re in the $12 – $15+ range. And, you’re lucky to convert 5 clicks out of 100 into a funded loan!
  • The sponsored payday loan and car title loan search results on the right-hand side of Google’s search results page were removed. That only leaves 4 at the top of the search results.
  • Payday loan and title loans exceeding 36% APR’s cannot participate in Google’s PPC program any longer.
  • Local results predominate and
  • You better have a moble/reponsive website to even come close to Page 2 or 3 of Google much less page 1.

Creating websites and posting regular content is a proven method for succeeding with Google and Bing’s search engines. The challenge is to consistently Post content. Few small lenders have the time or the ability to write decent 300-500 word content in the form of Posts/Content weekly.

Who on your Team has the time, much less the ability, to WRITE? Nobody.

The answer? I found a company that writes 500 word Blog Posts for $5.00 each!

At first, I was incredulous. I had to test these guys.

I expected some 3rd world English “writer” to scrape together a real SH*&^%TY “payday loan focused article that was “scraped” from a legitamate website. But no, I checked the test [see below] payday loan article I paid for on Copyscape and, SURPRISINGLY, found zero issues.

NOW! Consider this. Study the payday loan article I paid $5 for as it’s presented below. Then, think about how you could “spin” it for your use. For example:

  • Every time you read “payday loan” substitute “car title loan.”
  • Add YOUR city into the copy.
  • Add YOUR zip code into the copy.
  • Substitute the word “payday loan” with whatever business you’re in.

In other words, have Need Articles create 5, 10 or more articles for you and “spin” them for your specific circumstance and business.

You offer payday loans? Perfect. Car title loans? Payday loan software? Title loan software? ACH services? Sub-prime consumer data base reporting? Gold buying? Consulting…

ANYTHING! Whatever businesses your in!! These guys write good stuff CHEAP!

Get some content written by NeedArticles and start adding this targeted content to your website regularly.  This is called “SEO” and it works! Just fine tune it for your zip, city, State, business… to get ranked in Bing, Google, DuckDuckGo, etc.

OK, here’s the actual custom article NeedArticles wrote for $5.00 for me:


Why You Should Consider A Payday Loan

Do you need more money quickly? If you’re strapped for cash and don’t know where to get it, you should look into getting a payday loan. Also known as a cash advance, this type of loan provides you with an advance on your next paycheck.

Here are a few reasons a payday advance might be a good fit for you:

  1. You’ll Be Able To Get Cash Quickly

If you try to get a loan through a bank, you might not get a response right away. In addition, if your credit isn’t in perfect shape, you might not be approved for the loan at all.

As long as you have a regular job, you should be able to get a salary loan without an issue. In addition, you’ll be able to get the cash you need immediately. In fact, in many cases, people are able to get the money they need within 24 hours of applying for the loan.

  1. You Can Avoid Hefty Fees

Not being able to pay bills or your rent on time can really cost you. You could get stuck with costly re-connection fees, overdraft charges, or other expenses. If you’re way behind, you could even wind up losing your car or getting evicted from your home.

Thankfully, a short-term loan can allow you to pay all of your expenses when you need to. You’ll be able to avoid fees and other types of issues. You’ll be able to avoid falling into a financial sinkhole.

  1. You Can Work Out A Reasonable Repayment Plan

When you get a cash advance, you won’t have to pay back the money immediately. In most cases, lenders will work with you and come up with a payment plan that compliments your pay schedule.

You’ll be able to get the money you need, and then have plenty of time to pay it back. You could pay back the loan in a few weeks, or in a few months. Most lenders will be more than willing to work with you.

  1. You Can Do Everything Online

You don’t have to find a lender in your area in order to get the money you need. In many cases, you will be able to apply for the money you need online. From there, you’ll be able to get approved in minutes.

There are all kinds of payday lenders out there. Take a look at some of the options available to you. Whether you stop by a place in your city, or work with an online lender, you’ll be able to get all of the money that you need.

If you are in a bad financial situation, you will need to take steps to fix it. A payday loan will let you get the cash you need, even if your credit is in bad shape. This kind of loan is unsecured, and it’s very easy to get approved.

If you need money, make sure you’ve looked at all of your options! Take a closer look at short-term loans.


Not bad, eh? 510 words for $5.00.

Do you understand how this could easily be “spun” to help your business? And for $50, you can get 10 of these!

I placed my order with Need Articles and 6 hours later THEY WERE DONE WITH MY CUSTOM PIECE!

I retrieved my completed $5.00 article via email in Word format, uploaded it to my Blog and voila; great content for the search engines for a pittance.

My strategy? 2-3 of these week in and week out. With time, and by adding targeted keyword phrases like my company name, zip code, city, State… I’ll beat out my lender competitors because they’re all too busy to enen try to beat me in the search engines!

Get your articles written here: NeedArticles


Arizona Car Title Loan Laws

Arizona Car Title Loan Laws

Arizona and Repossession Laws

Arizona car title loan law states that if you are in default (i.e. aren’t making your monthly payments), then the title loan lender can take possession of your car even if they don’t have a court order to do so – as long as they don’t “breach the peace”.1)A.R.S. § 47-9609

California Title Loan Business Startup

Start a Title Loan Biz

The Arizona title loan lender statutes don’t define what it means to “breach the peace” but the general rule is that the creditor cannot utilize force or threats, cannot enter a debtor’s residence without consent, and cannot seize any property over the objection of the debtor.”2)Repossessions, National Consumer Law Center, 7th Ed..

Arizona courts have ruled that title loan lender repo agents cannot bring a police officer with them when they come to repossess the car, even if the police officer does nothing but stand there – and if they do it invalidates the repossession. 3)See Walker v. Walthall, 121 Ariz. 121, 124 (1978)

Other courts have held that the following actions “breach the peace”:

  • Grabbing keys from the debtor and twisting their wrist;
  • Pushing a door open and striking the debtor in the stomach;
  • Touching a resisting debtor to any extent;
  • Towing a car away while the debtor is inside it, despite their protests;
  • Running over the debtor’s foot with a car and flashing a gun;

Your Remedies for Unlawful Repossession in Arizona

So what happens if a title loan lender creditor doesn’t follow the law and breaches the peace while they are repossessing your vehicle?  First, repossession can be invalidated and you can get your car back.  Second, you can seek payment of damages based upon Arizona statute and the actual damages you incurred.

Is It a Crime in Arizona to Not Turn Over Your Car?

Yes but with caveats. It’s not unusual for title loan lenders in Arizona to think it’s ok for their repo agent to take a borrower’s car and told tell them if they didn’t turn the car over they could be charged with a felony and face jail time and fees.

It is true that Arizona has a law4)A.R.S. § 13-1813 that makes it a felony to unlawfully fail to turn over a car that is subject to a security interest but there are very specific requirements that must be met first before you could be charged with a crime:

  1. First, you must be at least ninety (90) days past due;
  2. Second, the bank, title loan lender (or other lender) has sent you written notice via certified mail return receipt, that you are ninety (90) days late in making a payment and are in default;
  3. You fail to get caught up on the payments within the next thirty (30) days.

Only if all three of these elements are met and then you fail to turn the vehicle over do you run the risk of having a felony charge. And be aware the Maricopa County Attorney’s Office rarely prosecutes these as crimes.

Title loan lender repo agents throw this statute around as if merely refusing to turn a car over results in a felony charge.


CFPB Car Title Loan Study

CFPB Car Title Loan Study

“About 1 million households use car title loans annually, according to the Federal Deposit Insurance Corp., and the Pew Charitable Trusts figures that consumers spend approximately $3 billion annually in fees.”

“The CFPB car title loan study also found that four-in-five car title loans aren’t repaid in a single payment as intended because the borrowers can’t afford to do so. Instead, those consumers renew their car title loans the day they are due. For more than half of the car title loans, borrowers take out four or more consecutive loans.”

The CFPB car title loan study found that these car title loans often have issues similar to payday loans, including high rates of consumer reborrowing, which can create long-term debt traps. A borrower who cannot repay the initial loan by the due date must re-borrow or risk losing their vehicle. Such reborrowing can trigger high costs in fees and interest and other collateral damage to a consumer’s life and finances. Specifically, the study found that:

  • One-in-five borrowers have their vehicle seized by the lender: Single-payment auto title loans have a high rate of default, and one-in-five borrowers have their car or truck seized or repossessed by the lender for failure to repay. This may occur if they cannot repay the loan in full either in a single payment or after taking out repeated loans. This may compromise the consumer’s ability to get to a job or obtain medical care.[Note: This number is highly suspect! How the CFPB determined this percentage is anyone’s guess. For us, it’s closer to 5%.]
  • Four-in-five auto title loans are not repaid in a single payment: Auto title loans are marketed as single-payment loans, but most borrowers take out more loans to repay their initial debt. More than four-in-five auto title loans are renewed the day they are due because borrowers cannot afford to pay them off with a single payment. In only about 12 percent of cases do borrowers manage to be one-and-done – paying back their loan, fees, and interest with a single payment without quickly reborrowing.
  • More than half of auto title loans become long-term debt burdens: In more than half of instances, borrowers take out four or more consecutive loans. This repeated reborrowing quickly adds additional fees and interest to the original amount owed. What starts out as a short-term, emergency loan turns into an unaffordable, long-term debt load for an already struggling consumer.
    • Vehicle title loans typically have terms of about a month to conform to laws in many states that specify allowable loan terms. For example, at least 8 states—Alabama, Georgia, Idaho, Mississippi, Nevada, New Hampshire, South Dakota, and Tennessee—set a maximum loan term of about 30 days (or one month), although loans can be renewed beyond this initial term.
  • Borrowers stuck in debt for seven months or more supply two-thirds of title loan business: Single-payment car title lenders rely on borrowers taking out repeated loans to generate high-fee income. More than two-thirds of title loan business is generated by consumers who reborrow six or more times. In contrast, loans paid in full in a single payment without reborrowing make up less than 20 percent of a lender’s overall business.
    • Single-payment vehicle title loans are available in 20 states. Thirteen states allow lenders to offer both singlepayment and installment vehicle title loans, and five states only allow these loans if they are repayable installments.

“Today, we are releasing our fourth report on this market, which is a study of single-payment auto title loans. Our study analyzed nearly 3.5 million loans made to more than 400,000 borrowers over a period of several years. We examined loan usage patterns, with a focus on the repeated use of these loans, how long it takes borrowers to repay, how often they fall behind, how many borrowers default, and how many have their vehicle seized by the lender. ”

“A typical single-payment auto title loan is taken out by a borrower to cover a cash-flow shortage between paychecks or other income. Borrowers who own their vehicle outright can put up their auto title for collateral in exchange for a loan. If the loan is repaid, the title is returned to the borrower. This credit is costly, as it is typically set at an annualized interest rate around 300 percent. Single-payment auto title loans are available in 20 states; another five states allow only auto title installment loans. ”

“Our report also found that few of these so-called single-payment loans are actually resolved with a single payment. These loans typically have a 30-day term, and most borrowers cannot afford to repay what they owe when the time comes.  In fact, our report found that more than four out of five auto title loans are reborrowed on their due date, rather than paid off. Only about 12 percent of borrowers manage to be one-and-done – paying back their loan, fees, and interest in a single payment without borrowing again soon afterward. ”

“Most borrowers resort to rolling over loans through repeated reborrowing, paying high fees each and every time. More than half of single-payment title loans lead to reborrowing three or more times after their first payment is due, and fully one-third are reborrowed six or more times.”

“In fact, auto title lenders typically generate about two-thirds of their business from the borrowers who end up being mired in debt for most of the year.”

“These loans thus present issues that are similar to those we have found with payday loans. High rates of reborrowing drive up costs, with the consumer eventually paying interest and fees that are far more than they expected. Indeed, for a sizable percentage of borrowers, the fees and interest exceed the amount of the initial loan itself. The Bureau has consistently recognized that consumers may need affordable credit to cover emergency expenses. If the product is structured to make repayment realistic, then such loans may help tide consumers over in their time of need. But if the payments are not affordable, those in a financial jam with nowhere else to turn may find themselves on a perpetual treadmill of debt, laden with mounting costs that disrupt the precarious balance of their financial lives. Although these products are usually marketed for short-term financial emergencies, the long-term costs of such loans often just make a bad situation even worse. ”

Title Loan Business

Title Loan Business

Like payday loans, vehicle title loans are made by non-depository lenders. The cost is typically expressed in dollars per $100 borrowed, and annual percentage rates (APRs) are in the triple digits. However, there are several key differences between the two products. While the repayment of a payday loan is timed to coincide with a borrower’s payday or other income receipt, car title loans are due in about a month regardless of the borrower’s pay frequency. In addition, instead of giving the lender a post-dated check or authorizing the lender to withdraw payments from a bank account, a vehicle title borrower provides the lender with the title to her car, which generally must be owned free and clear.5 The vehicle’s value is the primary consideration for the amount that can be borrowed. 6 Although the borrower retains use of her car while the loan is outstanding, a lender can repossess and sell the vehicle to satisfy the amount owed if loan payments are not made on time. Because account access is not required, vehicle title borrowers may not have an account with a bank or credit union. Finally, while payday loans are offered both through storefronts and online, vehicle title lending is typically conducted in storefronts so that the lender can assess the vehicle’s condition.

Link to original CFPB Study on car title loan businesses.