There isn’t a lot of information out there about who uses title loans. The two obvious sources for data on household credit choices leave us empty handed. The Federal Reserve’s Survey of Consumer Finances, began asking about payday loan use in 2007 but not title loans. The FDIC National Survey of Unbanked and Underbanked Households was a big step forward in getting academics access to national data on alternative credit choices, but does not address title loans. Because no national data exist on title borrowers, Kathryn Fritzdixon, Jim Hawkins and I surveyed customers in Texas, Idaho, and Georgia and we report the findings below.

It
appears that title lending customers differ from other borrowers in what is
often called the “fringe economy.” For instance, averaging around 40 years old,
they are older than borrowers who use other sources of alternative credit like
payday loans. We also asked borrowers about their level of education, and we
found the average level of education to be similar to the national average. 54.82%
of our customers have at least some college education (in contrast to rent-to-own
customers, 73% of whom had no more than a high school diploma, according to a
2000 FTC study). Over 40% of our borrowers have not used a checking account in
the past year, suggesting that they are unbanked, and less than 20% have used a
credit card in the past year. These numbers are lower than those for other
fringe credit users. For instance, 48.4% of rent-to-own customers reported
owning credit cards and 67.5% had checking accounts.

It seems
clear that different fringe credit products attract
different borrowers for different reasons. For us, this highlights the need for
states to regulate each product individually as opposed to lumping them all
into a single law.

Car graphic from Shutterstock.