The Average Title Loan Customer May Not Be Who You Think It Is
Popular belief is that people who take out car title loans and other non-traditional loans are all inner-city, unemployed or minimum-wage workers. While there is nothing wrong with those people, this is far from the truth.
According to the Cato institute, the American Association of Responsible Auto Lenders (AARAL) reports that a typical member’s customer is 44 years old and has an annual household income of over $50,000. As the US Census Bureau reports the median annual household income as just over $50,000, that places the average title loan customer in the middle of the pack in terms of household income – not near the bottom, like many people would have you believe.
Similarly, according to the Cato Institute, a study for the New Mexico state legislature found that 30 percent of such borrowers earned over $50,000 per year (that’s individual income, not household income – which is more in many cases). The same study found that 41 percent of title loan customers earn $25,000 to $50,000 per year.
Additionally, according to the Cato Institute, a study by the Illinois Title Loan Company found the following regarding title loan customers:
36 percent earn under $30,000 per year
55 percent earn over $40,000 per year
30 percent earn over $50,000 per year
Thus, the available information suggests that most title loan customers earn enough income to at least get by and, in many cases, do better than that.
Why Do People With Decent Incomes Use Title Loans?
According to the Cato Institute, such people typically use title loans because of credit issues. This reduces their access to traditional lenders.
Also, according to the Cato Institute, their credit cards are either maxed out or they don’t use credit cards at all. They tend to view title loans as superior to other forms of alternative lending (such as payday loans), as well.
Despite popular belief to the contrary, not all title loan customers earn little to nothing. Many are everyday people that you may encounter in your daily life.
Title lenders help serve a market segment that is not served well by traditional lenders. For better or worse, traditional lenders do not view those with credit issues in a positive light.
Whether you decide to use a title loan or not is ultimately your decision. Just remember that it is available for you if banks aren’t, assuming that you own a vehicle.