SHANGHAI—In China, a new type of internet loan comes with a catch: lenders can track your car’s whereabouts and can seize it if you fail to make payments.
The country’s large online peer-to-peer lending industry, which matches investors with small borrowers, has sprouted a business built around car ownership. Even though Beijing has curbed the activities of hundreds of online lenders, others are trying to expand by providing short-term cash to hundreds of thousands of individuals who pledge their vehicles as collateral for...