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Auto title loan perception is not what it seems

May 07, 2013 Phil Burgess

Auto title loan perception is not what it seems

Auto title loans are becoming a more viable and popular way for consumers to secure a lending option. However, there seems to be a negative connotation among consumers regarding the these short term lenders, according to Vanderbilt University. A study from the Nashville-based school explained the unwarranted pessimistic viewpoint.

"The fact that these loans typically have high interest rates and threaten to deprive borrowers of their means of transportation has generated significant concern," the study indicated.

Researchers investigated the issue by surveying more than 400 individuals who took out auto title loans in Idaho, Texas and Georgia. These three states were picked due to the differing regulations on the auto lending industry, a solid example of state-to-state discrepancies.

The Vanderbilt University research team discovered that less than 10 percent of cars involved in this form of short term lending as collateral are repossessed. Many hold the sentiment that defaulting on these loans will take away the primary means of transportation for workers, which then results losing jobs. The study's conductors debunked this myth as well. Very few of the consumers that use their vehicle as collateral and have the cars repossessed. In fact, the number was is so miniscule, establishing a link between auto title lending and workers being fired is a stretch.