Signs of
Predatory Lending
What to Watch Out For When
You’re Shopping for a Loan
Signs of Predatory Lending
Car Title Lending Abuses
Families risk losing their cars to
these predatory short-term loans.
www.responsiblelending.org
Signs of Predatory Lending
Car Title Lending Abuses
Sign #1: High Interest Rates
Car title lenders often express the cost of their loans as fees
for a short-term loan. For example, a title loan may cost $25
per $100 loan for a 30-day period. This equates to an annual
interest rate of 300%, and the short-term due date for the
entire loan plus the fee usually forces the borrower to take out
back-to-back loans.
www.responsiblelending.org
Signs of Predatory Lending
Car Title Lending Abuses
Sign #2: Short Due Date.
Car title loans are generally due in one month. Because the
borrower cannot pay the loan off in such time, most are
caught in a cycle of repeat loans that put them in a worse
financial position than when they first borrowed.
www.responsiblelending.org
Signs of Predatory Lending
Car Title Lending Abuses
Sign #3: Vehicle at Risk.
Title lenders secure their loans by holding the title of the borrower’s
vehicle. If the borrower does not pay off the loan when it’s due, the
lender can take possession of the borrower’s vehicle.
www.responsiblelending.org
Signs of Predatory Lending
Car Title Lending Abuses
Sign #4: Cycle of Debt.
Car title borrowers frequently end up in a cycle of long-term,
high-cost debt. In Missouri, for example, the state auditor
found that, on average, car title lenders make 3.5 times more
renewal loans than new loans each month.
www.responsiblelending.org