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24 Mar 2022

Financial Institutions

Trend for auto title loan in 2022: Tapping into the low-end market (Business Brief No.3967)


        Auto title loan saw high growth amid the COVID-19 crisis. The number of loan accounts increased by around 50 percent to 4.20 million accounts, with total outstanding loan rising 45 percent to a total of THB181 billion at the end of 2021, compared to the end of 2019.  Meanwhile, non-performing loans (NPLs) shot up by nearly 100 percent over the same period, amounting to THB2.93 billion. However, NPL ratio remains relatively low at 1.62 percent since the credit base has expanded significantly.

        The high growth of auto title loan witnessed during 2020-2021 came mainly from non-bank lenders. This was partly due to an influx of new operators into the market, especially those that are supported by big funders, and enlargement of customer base in the low-end market, encompassing the group that seeks motorcycle title loan. On the other hand, auto title loan provided by commercial banks has remained generally static with marketing strategies that focus on passenger cars, pickup trucks and big bikes, with middle-class customers as the primary target.

       Auto title loan will tend to grow continuously throughout 2022. However, this year’s growth may only be within a range of 15-20 percent, as opposed to the 20.4 percent YoY in 2021, due to a high base stemming from non-bank players’ proactive credit policy which involves rolling out a wider range of products through the granting of auto title loan and debt refinancing, adding channels for loan application with the opening of new branches to cover target service areas and expedite loan approval, as well as developing lending channel available on platform, increasing credit limits and offering special interest rates. Another positive factor is high demand for auto loan wherein low-income customers with a vehicle registration have more chances of getting a loan from the system and even receiving a higher credit limit at a lower interest rate compared to other types of personal loans. Meanwhile, auto title loan in the Thai banking system will likely maintain a stable course due mainly to the lower rate of car ownership during the COVID-19 crisis, with a number of lessees requesting a debt moratorium, extension and restructuring. As a result, the volume of lien-free cars entering the system has decreased.

        Additionally, interest rates for auto title loan will remain almost unchanged from last year. There is a vast range of interest rates offered from 10 to 24 percent p.a. for this particular loan due to intense competition among operators and its nature of high-yield loan. As interest rates rise amid an economic recovery riddled with complicated issues, the growth of auto title loan will provide retail customers, especially individuals with irregular income and groups struggling to make ends meet, improved access to formal loans in order to navigate this period of hardship. At the same time, potential risks should still be monitored over the forthcoming period in case the ongoing economic recovery is unexpectedly derailed by certain events.

Financial Institutions