When your car is a ticket to short-term cash, long-term financial hardship

 

Source: Sarah O'Brien, CNBC

While a small piece of the overall lending market, auto-title loans fall into a category of consumer borrowing outside the regular banking world. They work how you'd expect: You hand over the title to your car for a set amount — the average is $1,000 — and you get to keep driving your car. You get the title back when and if you pay off the loan.

But with interest rates that can reach the equivalent of as much as 400 percent or more annually and the full amount borrowed typically due in one month, more than 80 percent of borrowers roll over the loan, according to various research.

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