Who Uses Title Loans?

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.

Gender, Race, and Age of Title Lending Borrowers
	Full sample	Texas		Idaho		Georgia
		Borrowers	State-wide	Borrowers	State-wide	Borrowers	State-wide
Male	42.68	47.30	49.60	39.70	50.10	41.07	48.90
White	56.22	42.68	80.9	74.87	93.9	25	63.2
Black	18.16	28.57	12.2	0.5	0.8	53.57	31
Hispanic	16.17	20.41	38.1	14.07	11.5	12.5	9.1
Asian	0.75	1.36	4	0.5	1.3	0	3.4
Other	7.96	6.12	-	9.55	-	7.14	-
Two+ races	0.75	0.68	1.7	0.5	2.1	1.79	1.8
Age	40.7	42.6	-	38.6	-	43	-

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.