Who Borrows & Why
7.5% of Texas adults used a payday or auto title loan in 2019, and 4.7% used one in 2020. Usage likely went down because of stimulus payments and other financial supports, but it is on the rise again.
Number of Texans Using Payday and Auto Title Loans (2019 & 2020)
Source: Texas Office of Consumer Credit Commissioner CAB Annual Report, 2019 and 2020 and American Community Survey 1-year Estimate for Texans 18 and older, 2019
These high-cost loans disproportionately drain money from low-income Texans and communities of color:
Black and Latino Households make up 71% of auto title borrowers and 74% of payday loan borrowers.
Households with annual incomes of $50,000 or less make up 54% of auto title loan borrowers and 67% of payday loan borrowers.
Income & expense shocks common among payday and auto title loan borrowers:
Based on national data, people who reported using payday loans, auto title loans, and pawn loans in the previous year are much more likely to also report experiencing an income or expense “shock” in that same year.
More than 3 out of 4 (77%) payday loan, auto title loan, and pawn loan consumers had both a financial shock and difficulties paying a bill or expense
Source: Consumer use of payday, auto title, and pawn loans Insights from the Making Ends Meet Survey (2021)
Payday and auto title loans are not affordable for many borrowers and often make difficult situations worse:
At least 60% of auto title borrowers in Texas were stuck in high-cost loans for 6 months or more.
Nearly 1 in 4 auto title loan borrowers lost a car to repossession in 2020.
50% of installment payday loan borrowers are in debt for one year or more.
An average $500 loan cost $1,200 to over $4,000 to repay with refinances.
Average annual percentage rates on the loans range from 200% to 500% APR.
Source: Texas Appleseed analysis of the Texas Office of Consumer Credit Commissioner 2020 CAB reports and 7 TAC §83.6007 (2020).
Most payday and auto title borrowers come from working families and many are senior citizens or veterans who struggle to pay rent, bills, and for other basic needs. Payday and auto title loan businesses depend on repeat borrowers for the bulk of their revenues, rather than borrowers with an occasional financial emergency.
Texas Veterans Are Particularly Vulnerable
A 2018 survey of Texas veterans found that veterans face many harms from payday and auto title loans.
“I advise family and friends to avoid the trap. It became an endless trap.”
—Veteran from Harris County, Texas
The Effects of Payday and Auto Title Loans on Texas Veterans
Among Texas Veteran respondents, the rate for using payday and auto title loans was more than six times that of the overall Texas adult population, at 45%.
Payday and auto title loans are generally used to meet ongoing basic needs rather than for an unexpected emergency.
Among Surveyed Veterans Who Used Payday and Auto Title Loans
of surveyed Texas Veterans who used payday or auto title loans had trouble paying back the full loan when due.
More than 1 in 2 were caught up in ongoing payday or auto title loan borrowing, using the loans more than once per year.
Cycle of Debt
of surveyed veterans who had used a payday or auto title loan had trouble paying other bills because of that predatory loan.
of surveyed veterans who had used a payday or auto title loan were stuck in debt for three months or more.
Basic Needs Drive Use
“They are not worth getting involved with, they suck you in for a quick fix and you have to get another then another, they only make your situation worse.”
—Veteran from Houston, Texas
“It’s a terrible vicious cycle to get out of. Sometimes you have to take out a loan to pay the loan you have, then that equals two loans and so on.”
—Veteran from El Paso, Texas