Dallas-Based Startup Otto Is Reimagining Car Title Loans

Otto recently raised $4.5 million and aims to launch an app in early 2022.

Written by Abel Rodriguez
Published on Oct. 11, 2021
Dallas-Based Startup Otto Is Reimagining Car Title Loans
Photo: Shutterstock

Otto, a new Dallas-based fintech startup, has raised $4.5 million in seed funding to develop an app that will let people borrow money against their car titles. This will allow drivers to use their vehicle as an asset, according to the company’s website.

Here’s how Otto will work once its app is released in early 2022. Users will sign into the app and input the make, model, mileage and condition of their car. Users are then pre-approved for a credit line ranging from $500 to $10,000 and mailed an Otto credit card that can be used for everyday purchases.

Otto differs from traditional car title loans because its credit card offers a lower interest rate option “that is there when you need it, all from the convenience of your smartphone. You won’t need to reapply, and if you pay the full balance of what you owe on time each month, then you won’t have to pay interest at all,” according to the startup’s website.

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Car title loans are nothing new. Dating back to the 1990s, these loans were marketed to people needing quick cash. According to research agency the Center for Responsible Lending (CLR), traditional car title loans often worsened a borrower’s financial situation.

“These loans are related to a cascade of other financial consequences, such as increased overdraft fees, delinquency on other bills, involuntary loss of bank accounts and even bankruptcy,” reads a 2019 report.

Part of what makes car title loans abusive is the high annual percentage rates. According to CLR, these loans typically have an annual percentage rate (APR) of at least 300 percent.

The history of car title loans inspired George Utkov, Jordan Miller and Daniel Ashy to start Otto, according to TechCrunch.

“Millions of people every year take out what are called title loans. And it’s when you own your car outright, and basically, go pledge the title of your car as collateral against the loan. These loans are 30 days long. They are 500 percent+ APR, and they absolutely crush people,” Miller told TechCrunch.

Utkov and Miller previously worked together at Known Development, a global supply chain company based in Dallas, according to their LinkedIn profiles. Miller was also named in the 2020 Forbes 30 under 30. Now, the three co-founders are coming off a $4.5 million seed round and preparing to launch an app.

Uncommon Capital led the recent funding round. Entrepreneur Mark Cuban, Leo Polovets, 1930 Capital, Pelion Venture Partners and others are among Otto’s early investors, according to TechCrunch.

In addition to providing sustainable credit, Otto hopes to help advance financial literacy among its borrowers. According to the company’s website, Otto will not repossess vehicles if borrowers fail to make a few payments or pay late. Instead, the company will work with the borrower on a new payment plan. The app will also provide spending reports and is looking to forge partnerships with other financial agencies focused on advancing financial literacy.

Otto is currently hiring for seven open positions, including engineers and a product manager.

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