The payday loan industry, which includes auto title lending, is notorious for charging interest rates of 500% or even higher, and most often they prey on low-income Americans.
The $44 billion payday loan industry, which continues to grow despite its bad rap, consists of high-cost, low-quality products that send people into cycles of mounting debt.
These loans typically involve small amounts for short periods. An auto title loan is similar, but uses a car title as collateral rather than the post-dated check or access to a checking account required by payday loans. If borrowers are unable to pay back the loan amount in full at the end of the term, they can make an interest-only payment to delay repaying the loan. This process increases total fees without decreasing the principal of the original loan.
However, is there such a thing as a good payday loan?
The $94 million CU Community Credit Union in Springfield, Mo., is offering its members an alternative to the high-interest, short-term loans – with the help of a $2 million U.S. Treasury grant it received late last year. Instead of paying an annual interest typically upwards of 400%, account holders with the credit union for at least 90 days can pay around 27% interest on short-term loans through its initiative.
"CDFI grants have the power to transform communities, and that's why we are so excited to have been awarded the grant," Judy Hadsall, president/CEO of CU Community Credit Union, said in a statement. "Although the economy is improving, there are many people in Greene and Christian Counties who are struggling with debt, and they go to payday lenders to solve short-term liquidity problems," says Hadsall. "Our hope is that we can help fill in the gaps where other financial institutions haven't been able to provide assistance and create a lasting impact for people's financial well-being."
In 2014, 2.5 million Americans took out car title loans, which can be a short-term blessing as well as a long-term nightmare. Rob Zian, owner of Auto Title Loans San Diego, said that credit unions should offer their members the chance to borrow against their vehicle without refinancing – and not charge 300% to 400% interest.
"If anyone spends the time to do a little research on auto title loans, they will quickly realize that the reputation about them is nothing short of terrible," the California-based businessman said.
The average person pays $3,093 to borrow $951 on an auto title loan, according to the Center for Responsible Lending's 2013 report on the industry.
"In my experience as an owner of a title loan company, I have experienced absolutely nothing but aiding people and getting them out of really tight financial spots," he said. "I often wonder why more credit unions, including my own, don't offer their members these types of alternative loans."
Zian said he is a business person first, but he isn't interested in repossessing a vehicle.
"No one wants to take out a title loan or payday loan," he said. "But when a person needs one it's in the consumer's best interest to find someone that cares about their well being and not someone who will take advantage of them."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
