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Will your auto title loan cause problems with employment?



“Jobs in Northeast Ohio are least accessible for the people who need them most,” according to Brett Barkley, Cleveland Federal Reserve. Over the last 15 years, Cleveland has experienced a large drop in jobs located near where people live and currently ranks below average for access to employment by public transport.1 In areas of high poverty, this drop has been especially large. Jobs which have lower qualifications, such as those that only require a high school diploma or pay less than $1,250 a month, are the hardest to get to by public transportation.2

Auto title loans are making this transportation and jobs problem worse. An auto title loan is a loan where a person borrows money using the title of their car as “collateral” or security for the loan. These loans usually have very high fees and the borrower often cannot afford to pay off the loan when due. If the borrower does not pay the loan when due, the lender can repossess and sell the car to pay off the loan. Borrowers who cannot pay off the original loan are forced to take out another loan or lose their car. The new loan again includes the high fees. Each time the borrower is unable to pay off the loan, the borrower is forced to take out another loan with the same high fees, so the borrower falls deeper and deeper in debt.3

The federal Consumer Financial Protection Bureau reports one out of five people who borrow auto title loans lose their vehicle.4 The Center for Responsible Lending reported that in 2013, 135,746 auto title loans were made in the state of Ohio. So, approximately 27,000 Ohioans, in 2013 alone, may have lost their cars due to their inability to pay off an auto title loan.5

Auto title loans may seem like a quick fix in an emergency, but very seldom provide the help a person needs. Because jobs are not always accessible by public transportation, the loss of a car can also mean the loss of a job. For these reasons, auto title loans should be avoided. Not only do these loans create problems for individuals, but they can impact our entire community by undermining opportunities for employment.

1http://www.brookings.edu/research/reports2/2015/03/24-people-jobs-distance-metropolitan-areas-kneebone-holmes
2https://www.clevelandfed.org/newsroom-and-events/publications/a-look-behind-the-numbers/albtn-20151123-a-long-ride-to-work-job-access-and-public-transportation-in-northeast-ohio.aspx 
3http://www.cleveland.com/consumeraffairs/index.ssf/2014/08/auto_title_loan_ads_gloss_over.html
4http://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-one-five-auto-title-loan-borrowers-have-vehicle-seized-failing-repay-debt/
5http://www.responsiblelending.org/payday-lending/research-analysis/crl_ohio_analysis_nov2015.pdf

By Christopher Kolezynski

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