Car Title Loan Statistics 2022-2021
- The Average APR is 300%
- Approximately 1% of America Adults Use These Loans
- 1 out of 6 Title Loans End With Repossession
- 1.6 Million Borrowers in 2016 Rolled Over Their Loans
- Lenders Offer 25 to 40% of a Vehicle’s Value
- The Average Title Loan Amount is $700
- Single-Payment Borrowers Make Up 12% of All Title Loans
- Most Borrowers Renew Their Loan Eight Times Over
Title Loan Stats and Facts
Title loans are a very unique type of short-term loan that comes at a very high interest rate. The average title loan boasts a 300% APR. This is equivalent to 25% interest for a typical loan term equal to a month. While that may not seem absurd to begin with, most borrower roll over their loan for multiple months. Keeping the loan active for a full year can mean paying, on average, three times that amount you originally borrowed in just fees and interest alone. Source
It’s best estimated that around two million adult Americans utilize these high-interest title loans on an annual basis. That’s equivalent to about one percent of the adult population. While this may not seem like a lot, it truly is when you take into account the fact that only 20 states allow these types of loans to be offered to borrowers. The main demographic of borrowers that utilize this type of financing are those with less than perfect credit who are not eligible for other types of financing, like credit cards and personal loans.
When a borrower takes out a title loan, they are required to give the lender possession of their car title and a set of working keys. At the end of the loan term, typically a month, the borrower is required to pay a balloon payment comprised of the principal loan amount and interest fees. If they fail to pay it, their vehicle can be repossessed by the title loan lender. Once repossessed, the car is sold to recoup the loan funds for the lender. Unfortunately, one out of every six individuals who take out a title loan end up losing their vehicle due to repossession.
While title loans tend to be advertised as short-term loans to provide emergency funds, that’s not really the case. According to records in 2016, 1.6 million borrowers ended up rolling over their original title loan for additional months. Most borrowers go into getting this type of loan with the intent that they’ll pay off the loan amount and the fees associated with the loan in a month’s time. However, if they can’t afford this balloon payment, most title loan lenders will allow the borrower to rollover their loan for another month. This rollover process will tack on additional fees for the borrower. This essentially ends up piling up the fees owed on the loan for the borrower.
In order to receive a title loan on your vehicle, most lenders require that you have a free and clear title. This simply means that your car is paid off and you have the title in hand. The lender will assess your title and your vehicle to determine your vehicle’s value. Typically, they will offer you a loan amount that is between 25 and 40% of the value of your vehicle. For example, if a lender determines that they believe your vehicle is worth $10,000, they will fund you anywhere between $2,500 and $4,000. These lower loan amounts help to ensure that the title loan lender can recoup their total costs if they end up repossessing your vehicle after multiple rollovers of your loan.
Title loans can be given out for all types of vehicles, including cars, trucks, and motorcycles. As you’ve learned above, the loan amount that you’re offered will be dependent on your lender’s perceived value of your car. This amount can range anywhere from as low as $100 to as high as $5,500. Rarely are title loans approved for over $10,000. In fact, the typical loan amount for title loan borrowers is around $700. Realize that this is the principal amount that is owed. The borrower will still owe for interest and other associated fees, like rollover fees.
It’s not uncommon to see title loans advertised as very short-term options for getting money quickly. While most title loans are initially established for a period of a couple of weeks to a month, they typically last longer. In fact, only 12% of all title loan borrowers pay back their title loan within the first month. The remaining will roll the loan over for at least another month for an added fee. It’s very clear to see just how easy it would be to stack up a large payoff amount with a title loan in just a short period of time.
While a title loan is intended to be taken out for a month or less, that’s typically not the case. Most borrowers will end up renewing their title loan eight times. That means that their title loan will be taken out for an average period of nine months. It’s important to note that each month, the loan is not only accruing interest fees, but there is a rollover fee added to the total loan amount. Borrowers who take out an initial loan of say $950, will end up paying over $2,000 in fees and interest until it’s all said and done. That’s a very ridiculous amount of money to pay for borrowing funds so make sure to use a title loan calculator to estimate your title loan payments.