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1 in 5 Single Repayment Car Loans Result In Repossession

Thursday, May 19, 2016 - Posted by Philip Harvey

The Consumer Financial Protection Bureau (a consumer protection watchdog in the US) undertook a study of single repayment car loans.

These loans are typically short term loans for consumers in severe financial difficulty and are banned in half of the states in the US. Their existing car is offered as security on a loan that can result in very high interest rates of up to 300% (well in excess of the mandated cap in Australia on interest rates).

By taking out such a loan, according to the report, consumers end up in a downward spiral of debt that they cannot escape. Loans are often taken to repay the initial car loan.

These loans became popular with lenders following regulatory caps in payday lending rates. Like Australia, the US is also investigating the payday industry with this style of loan also under review.

Source: CFPB Press Release

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