Much like predators in the animal kingdom that target weak members of the herd, predatory lenders try to appeal to those who are struggling financially in society. When sinking in debt, the loans from these companies seem like a lifeline to get out of trouble, but high interest and huge fees can be an anchor to an even worse situation. A growing trend in the lending industry is the auto title loan, where lenders issue money with borrowers' vehicles serving as collateral.

These loans entice borrowers because of the opportunity to get funds quickly from an asset that distressed fund-seekers already have. The exact amount of money that a person receives is often based on the vehicle's value and sometimes comes with no income check from the lender. Unfortunately, that can allow folks to take out funds that they might not ever reasonably be able to pay back.

The lending companies offering auto title loans often make the situation more dire by saddling them with huge fees and high interest rates. In a recent deep dive into the problem from The New York Times, it found effective rates in over 36 loan agreements ranging from about 80 to over 500 percent. On top of that, additional charges can mean even more to pay, as well.

Those with these loans are understandably desperate not to lose their vehicle. A common solution to that problem is rolling over the amount due at the end of the loan's term to buy more time to pay back the money, but doing so can also add more fees. According to the NYT, a former president of title loan company TitleMax said in a 2009 deposition that the average customer prolonged their loans eight times. One study also indicated that one in six people lost their vehicle to repossession.

Over 1.1 million households took out an auto title loan in 2013, according to the Federal Deposit Insurance Corporation as cited by the NYT, but this type of lending hasn't been made legal everywhere. The Michigan Legislature was recently trying to allow these loans in the Mitten State, but the proposed law has met with intense pushback from consumer groups and state's pawnbroker association. If passed, loan-seekers could face interest rates as high as 276 percent when borrowing against their cars.


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