Vehicle-title loans are high-cost loans with little or no underwriting that are secured by a borrower’s car title. While the borrower of a vehicle-title loan keeps possession of the car and can continue to drive it if they make payments, the lender can threaten repossession or actually repossess the vehicle with no legal process since they are in possession of the title and, sometimes, the keys. Title lenders charge fees and interest as high as 300% Annual Percentage Rate (APR) and put borrowers’ important assets—their cars—at risk of repossession. Broadly, lending can occur in one of two ways: the lender can extend credit under their own name, or the lender can make an arrangement with an out-of-state bank to be the lender of record. In states where vehicle-title prohibitions exist, some high-cost lenders improperly claim the latter arrangement excuses the lender’s evasion of rules and laws made to protect the finances of state residents. High-cost vehicle-title lending is currently prohibited in 33 U.S. states and the District of Columbia. Notwithstanding this widespread body of state law, the Federal Deposit Insurance Corporation (FDIC) found in their 2021 National Survey of Unbanked and Underbanked Households that residents of all but three states had used consumer vehicle-title loans in that year.

Important details about lender practices and impacts are not fully transparent to the public, despite the high costs and stakes involved with these loans. To add to the body of information available about vehicle-title lending, CRL commissioned BSP Research to survey 7,115 Americans in July 2024, assembling a sample of 400 respondents who had taken out vehicle-title loans in the past 24 months. Respondents described the circumstances, duration, amount, terms, and impacts of their borrowing. CRL identified important findings from the survey responses, including: Vehicle-title loans are very expensive, often unaffordable, and can lead borrowers into a debt trap; Vehicle-title loans have onerous consequences; Vehicle-title loans are being made in 23 jurisdiction (22 states plus DC) that prohibit vehicle-title loans.

Press Contact: Matthew.Kravitz@responsiblelending.org