Title loans are very risky. Because you use your vehicle as collateral, it can be taken by the lender if you don’t make your payment or come to an alternative arrangement. Often, that means rolling over your loan. The Consumer Financial Protection Bureau studied title loans and found that over 20 percent end in a car being repossessed. Only 12 percent of borrowers pay off the loan without having to renew. More than a third of borrowers end up taking out more than seven loans, meaning they have to pay nearly as much in fees as they borrowed in the first place.
However, there are ways these loans can affect your credit, especially if you can’t keep up with your payments. Part of getting a payday loan involves leaving a post-dated check, or giving the lender access to your checking account if you apply online. When the loan comes due, the lender deposits the check or withdraws what you owe. If you don’t have enough in your account to cover the amount you owe, you could bounce a check or overdraw your account.

These arguments are countered in two ways. First, the history of borrowers turning to illegal or dangerous sources of credit seems to have little basis in fact according to Robert Mayer's 2012 "Loan Sharks, Interest-Rate Caps, and Deregulation".[41] Outside of specific contexts, interest rates caps had the effect of allowing small loans in most areas without an increase of "loan sharking". Next, since 80% of payday borrowers will roll their loan over at least one time [11] because their income prevents them from paying the principal within the repayment period, they often report turning to friends or family members to help repay the loan [42] according to a 2012 report from the Center for Financial Services Innovation. In addition, there appears to be no evidence of unmet demand for small dollar credit in states which prohibit or strictly limit payday lending.

A 2009 study by University of Chicago Booth School of Business Professor Adair Morse[52] found that in natural disaster areas where payday loans were readily available consumers fared better than those in disaster zones where payday lending was not present. Not only were fewer foreclosures recorded, but such categories as birth rate were not affected adversely by comparison. Moreover, Morse's study found that fewer people in areas served by payday lenders were treated for drug and alcohol addiction.


However, there are ways these loans can affect your credit, especially if you can’t keep up with your payments. Part of getting a payday loan involves leaving a post-dated check, or giving the lender access to your checking account if you apply online. When the loan comes due, the lender deposits the check or withdraws what you owe. If you don’t have enough in your account to cover the amount you owe, you could bounce a check or overdraw your account.
Some alternative payday loan companies market themselves as more socially responsible than traditional payday lenders because they offer better terms. They also want to help consumers rebuild their shaky credit and make payments on time. For instance, LendUp provides financial education and rewards existing borrowers who repay their loans to be eligible for loans at larger amounts and lower rates. Fig Loans only charges fees to cover the costs of the loan.
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