A Vehicle Title Loan (or Car Title Pawn) is a short-term (typically 30-day single-payment) non-bank loan where a borrower pledges the clear, lien-free title of their car, truck, or motorcycle as collateral in exchange for an immediate cash advance equal to 25% to 50% of the vehicle's wholesale value.
Regulatory agencies including the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) classify commercial auto title loans as extreme high-risk debt traps: 1. Triple-Digit APRs: Title lenders typically charge a monthly finance fee of 15% to 25% per month, which equates to an annualized 180% to 300% APR. 2. Rollover Cycle: According to CFPB empirical studies, over 80% of single-payment auto title loans are rolled over or renewed on their due date because borrowers cannot afford to pay off the full principal plus the 25% fee in a single lump sum. 3. Repossession Risk: Roughly 1 in 5 auto title loan borrowers ultimately have their primary vehicle repossessed by the lender, jeopardizing their ability to commute to work.