When you are in urgent need of cash, a title loan (also known as a car title loan) could be good way to borrow money against the equity of your vehicle. These loans make borrowing accessible to people who are underemployed, suffer from poor credit or are bankrupt.
Some of the states have brought legislation regarding title loans to control the interest rates and the amounts that can be borrowed. Here is a ready guide to understand the basics of state-wise title loan legislation.
Loan length limited to 30 days
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The Alabama Pawnshop Act governs all title loans in the state. Prior to seeking a title loan, you must ensure that the lender is licensed in the state of Alabama to issue a title loan. An annual fee in the form of state licensing fee needs to be paid by the title lenders in Alabama.
Title loan repossession laws in Alabama allow a lender to take the borrower’s vehicle in the event of a default. The lender has the legal right to keep all proceeds from the sale of the vehicle, over and above the balance loan amount with interest.
Alabama laws allow title loans to be taken out only for a maximum of 30 days. The interest rates are capped at 25% per month. You could potentially lose your vehicle if you cannot repay the loan at the end of 30 days. However, the provision of ‘right to cure’ can provide you with an additional 30 days to clear all dues.
Friendly to borrowers
Arizona is among the most borrower friendly states where title loans are concerned and continues to attract people and businesses from the collapsing state of California but let’s get back on track. There are no complex documents required. All you need is a car with a lien-free title in your name and a government issued ID. Arizona Revised Statutes Title 44-Trade and Commerce 44-291 caps the maximum interest charged by lenders as per the amount borrowed.
This means you can be charged 17% for car title loans less than $500 and 10% for loans above $5,000. Arizona is also among the few states that have set regulations regarding contracts. However, there is no limit on the term duration of the title loan, although, it is generally for 30 days.
Repossession laws are borrower friendly here. A lender will have to return the surplus amount left after taking out total expenses for the loan, repossession, and sale. It is also mandatory for the lender to sell the vehicle in a commercially reasonable manner.
Loan Roll over relief
Delaware title loan rules are put in place to ensure that repayment does not become an undue burden on the borrower. In Delaware, while taking out a car title loan, you might be legally required to hand over a set of keys and original vehicle title to the lending company. Title loan repossession laws make it easier for lenders to repossess a vehicle without having to call in a tow company.
Unlike other states, Delaware does not limit title loan interest rates. A lender can charge any interest rate depending upon the risk taken and your financial capabilities. However, the usual interest rate charged by most lenders is 25% monthly.
There is a cap on the monthly roll-overs. In the event of default of a loan a borrower can only be given the benefit of roll-over for 180 days from the date of loan acquisition. Also, there are certain written disclosures that are required to be communicated to the borrower.
Limit on interest and time
Georgia title loan laws such as Georgia Code 44 12 131 legalize and set limits on auto loans among other short term lending. In Georgia, there are set regulations governing lenders. Only a licensed industrial loan lender can offer title loans in the state.
There are interest limitations as well. The first 30 – 90 days, a lender cannot charge more than 25% interest and $10 as fee every 30 days. Beyond that the interest rate is reduced to 12.5% interest and $5 fee for every 30 days.
There are also duration limits set at exact 30 days. However, a lender has the capacity to offer an extension every 30 days.
If you default on loan payments then repossession code sections 44 12 131 and 44 12 138 come into effect which state that a lender can only rightfully take the remaining balance loan amount with interest, repossession fee up to $50 and storage fee up to $5 a day. All other sales proceeds are legally required to be returned to you.
High APR State
Idaho is among the 17 states that allows triple digit APRs and its largest city of Boise does not have the violence and chaos that afflicts Miami, NYC, or LA. To this effect, Idaho Title Loan Act was passed in 2006 that stipulated lenders to get licensed under the Idaho Credit Code. Other stipulations require concrete warnings about the high interest rate and to encourage customers to take on other low interest alternatives.
A title loan cannot be taken out for more than 30 days in the state. However, they can be automatically renewed every 30 days unless you surrender the vehicle or pay off the principal with financial charges. However, you need to pay off at least 10% of the principal amount at every successive renewal after the third month.
Idaho also gives legal rights to borrowers to challenge a repossession sale and sue for the amount of deficiency if a lender pays less or sells the vehicle unfairly.
Protection from Balloon Payments
Only lenders licensed to write an installment loan can issue a title loan in Illinois. Interest is calculated as simple interest on the principal amount which means that interest cannot be charged on interest fee or outstanding interest. The loan payments must also be amortized into equal monthly repayments.
This gives you added protection from falling into the trap of balloon payments where interest amount often exceeds principal amount with consecutive renewals. In Illinois, the monthly payments cannot be more than 50% of your income. This greatly affects the amount that can be borrowed and the duration.
The lender can also legally take possession of your vehicle and sell in case you miss a payment or do not adhere to the loan requirements such as maintaining insurance coverage. However, the law states that the lender is required to refund any surplus back to you on sale of the vehicle.
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Interest rate cap in Mississippi
Title loans in the state are governed by the Mississippi Title Pledge Act and the recent Mississippi Credit Availability Act. The laws have capped the interest rates at 25% monthly which is equivalent to 300% APR. Also, there is a limit on the amount you can borrow.
Title loan rules have set a maximum limit of $2,500 on title loans. The amount also depends on the current market value of your car. Set duration as per the law is 30 days. However, you have the option to roll-over a loan for another 30-day term period if the lender agrees. However in Mississippi there are a large number of lenders so there are many options available to receive a loan quickly.
In addition to the interest, you will also have to pay off 10% of the principal amount on each loan extension. Mississippi title loan repossession gives a legal authority to the lender to sell your car immediately on default of a payment. However, you can exercise your right to cure within 3 days and prevent the lending company from repossession.
$5,000 Title Loan Limit
Missouri Revised Statute 367.500 directs title loan companies to ensure borrowers can repay the loan at their current income before providing a title loan. This feature is not present in many states. There is no limit on the amount of interest a lender can charge you. However, as with the country average, interest rates do not exceed 25%.
Missouri Law limits the loan amount to $5,000 or less with a minimum duration of 30 days. The law also offers the option to roll-over and extend a title loan only if the principal amount is being reduced by 10% every subsequent renewal.
There are certain repossession rules that need to be followed by a lender in case of a loan default. The state requires the title loan company to provide various notices which gives a borrower 30 days to catch up before finally repossessing the car. They are also liable to refund any surplus after the sale of the car.
Borrower must be able to repay
Nevada 604A governs the state’s title laws. Nevada gives you the option to rescind a title loan contract. However, you need to do it before the close of the subsequent business day.
The law requires lenders to make sure that a loan can be comfortably repaid by the borrower. The payments cannot exceed 25% of a borrower’s monthly income. However, the principal amount has no maximum limit.
Nevada has not put any cap on the interest rates which allows lenders to charge as much as they want. Term length is limited to 30 days with maximum six 30-day extensions. The state law does not protect the borrower from the vicious trap of balloon payments.
The law requires at least 30 days of notice on default before repossession. After repossession, the lending company needs to provide an additional notice of 15 days and a repayment plan before selling the car.
Maximum loan of $10,000
Title loans are secured loans where you can potentially lose your vehicle if you default on payments. Chapters NH RSA 397-A and RSA 383-C govern title loans in New Hampshire. The maximum title loan amount that you can take out is capped at $10,000. However, your car should be valuable enough for this amount.
The state has capped the interest rate at 25% which is on the high side and equates to 300% APR. Also, the term length is limited to one month. You can only roll-over balances for a maximum of 10 months because you are legally required to pay off 10% of the principal amount at each subsequent extension.
New Hampshire does not offer the right to cure which means lending companies can immediately sell the car upon repossession. This does not leave you with any grace period to catch up on loan payments. Also, in case of a deficiency in the sale amount, the title loan company can bill you for the remaining balance.
Uncapped interest rates for borrowers
New Mexico Small Loan Act governs title loans and licenses lending companies in the state. There are very few regulations regarding title loans in New Mexico. The maximum loan amount set by the state is capped at $2,500.
There is no limit on the interest rate charged by lenders. Many lenders resort to charging 25% and higher on a monthly basis. New Mexico has no limitations on the loan duration as well. However, 30 days is the usual term length. You can default on your loan by not paying the repayment amount by the due date or breaching the contract.
Repossession laws in New Mexico only apply to breaching peace. There is no other protection to borrowers. Lending companies can sell your car immediately upon repossession without giving you any notice. New Mexico is among the riskiest places to take up a title loan because of a violent history regarding repo-men and lacking title loan laws.
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Loans are allowed but with restrictions.
Title loans are governed under title loan laws in South Dakota. Interest rates were very high in the state for which South Dakotans started an initiative to have it capped at 36%. Repossession laws here are designed to protect borrower’s interests.
Lenders are not required to notify you about repossession. However, they are supposed to send a notice stating how you can retrieve it.
The said notice will state the stipulated time within which you need to complete the necessary requirements. This usually includes full payment of loan principal and accrued financial charges. Your car can be sold in case of a default. However, any surplus balance remaining after sale of your vehicle will be refunded to you. The process and requirements to obtain a loan, such as the application process for borrowers are generally the same here as many other states.
Title loans are usually for 30 days or less in South Dakota. However, you have the provision to renew it for up to 4 times. After that, the law requires payment of 10% of the loan amount including fees and interest. There is no maximum limit on the amount of loan you can take out. However, the car title needs to be free of lien.
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The TN Title Pledge Act allows licensed lenders to accept personal property as collateral against 30 day loans. Interest rates are capped at 2% monthly by Tennessee title loan laws. However, the law provides for additional fees to be charged over and above the interest rates. These cannot be more than 1/5th of the loan principal amount.
TN Title Pledge Act also limits the maximum loan amount at $2,500 with loan duration of only 30 days. However, they have the option to renew as long as the loan is not in default. After the second renewal, at least 5% of principal amount and financial charges need to be paid. Borrowers can continue renewing automatically as well.
A lender does not need to notify the borrower about repossession. However, the borrower should be sent a default notice. Also, the lender needs to keep the vehicle for a minimum of 20 days before selling it at an auction in a fair manner.
Interest Rate Cap and Loan Term Regulation
The Lone Star State – the most prolific state in the country. Jobs, businesses, people continue to poor into this state.
Texas title loan laws are looser than most states in the country. There is currently no cap on the title loan amount. However, interest rates are capped at 10%. This does not bring much respite to borrowers as there is no limit on the fees charged by a lender. Statistics show that the average title loan has an APR between 114% and 277%.
Loan term is an area closely regulated by Texas Law. Credit service contracts can only be renewed for 180 days. This means a title loan of 30 day duration can be renewed just 5 times. Business on the internet is permissible in this state. So the state is fairly strict on how long can you get a title loan for.
Vehicle repossession laws are pro-lender. Your car can be repossessed even if you are late on the payment. The lender can legally repossess your vehicle within the week of you missing a loan payment. Also, they are not required to send you prior notification or get court approval.
Look at ability to repay the loan
Title loans in Utah are governed under Title Lending Registration Act. Searching for loans and reading the act it requires lenders to consider the repayment abilities of a borrower by looking at current and expected income and pending debts. Utah does not limit the loan amount.
Utah also does not have any specified interest rate limits. Lenders usually tend to charge as per the national average of 25% monthly. Lenders also have the freedom to set their own term limits. However, title loans are usually not given for more than 30 days. In store and online loans are available.
Title Lending Registration Act does not say anything about sending a notice before repossession or sale of the car.
This means that a repo-man can come knocking whenever you default on the loan. However, the law clearly states that your peace cannot be breached during repossession. Utah does not provide the right to cure as well which means you do not get any grace period once you default.
Strict due dates for auto equity loans
Title 6.2 of the code of Virginia governs title loans. It stipulates the maximum loan amount to be less than 50% of the car’s fair market value. However, Virginia does not set any limits on the dollar amount. The maximum interest rates are caped as per the amount of loan you borrow.
The monthly interest rate is capped at 15% for a loan amount of$1,401 and 22% for $700 or less. This means you pay more when you borrow less.
Virginia title law does not allow for any kind of renewal or extension. A loan is due exactly on the due date. This protects the borrower from entering a vicious cycle of debt. Loan terms need to be between 120 days and 12 months.
Repossession laws also favor borrowers in Virginia but with high taxes and poor political leadership this state is not exactly shining like Florida, Alabama, or Texas is. A lender needs to provide at least 10 days of advance notice before repossession and 15 days before sale.
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Wisconsin Act 405 put a number of restrictions on pay day loans and title loans. The loan amount can be a maximum of $25,000 or 50% value of the car whichever is lower. Term restrictions include a 6 month loan duration limit. Lenders can charge a late fee of 2.75% if a loan is not paid till the due date.
Most of the stipulations laid down by title loans in Wisconsin are not needed anyway. For instance, title loans average for only 30 days across the country. Also, it is very rare for a person to want a title loan higher than $2,000 let along $25,000.
However, Wisconsin title loan law has actual protection where possession is concerned. A written notice needs to be provided at least 20 days prior to repossession. This can give you ample time to catch up on any late payments and default. However, a lender does not need to wait before selling your car.
Large scope for title loan lending in this state
California laws are considered among the most lax when it comes to regulating lenders but when it comes to regulations for other businesses such as energy and auto, The Golden State has severe laws which is why the golden state is not golden anymore though this is another topic. Specific requirements regarding the car are up to the creditor to decide. There are no requirements as per the loan laws in California.
Loan amount of $2,500 and less can have an interest rate of 5% or $50. Any amount between $2,501 and $4,999 can have $75 as interest. Stores provide title loans online and in stores.
Loan amount higher than $4,999 does not have a specified interest cap. Late payment charges are capped at $10 for 10 days and then $15 per day.
There is no requirement for a lender to inform local authorities before a repossession takes place. However, the lender needs to inform local authorities within the hour after repossession. The owner should also be notified within 48 hours. A communication stating intent to sell must be sent to the borrower within 60 days giving at least 15 days of notice.
30 day repayment of title loans
Kansas allows lenders to set their own requirements and terms. For instance, there is no cap on the maximum loan amount or interest rate charged. Kansas does not have any limitations on the number of fees charged as well. However, late payment charge is capped at 5% of the principal amount or a total of $25, whichever is lower.
Kansas gives borrowers 30 days to repay title loans. However, two extensions of 30 days each can be made provided both lender and borrower is in agreement. On top of this, borrowers cannot obtain another title loan with the same lender once previous loan or extension has been paid off for at least 60 days.
In Kansas, there is no fee or penalty if you want to pay off a title loan early. You also have the right to cure in case of a default. Lenders are required to provide a default notice 10 days after the default. You will have additional 20 days to pay off the loan balance with financial charges or have the car repossessed.
Guidelines and laws for title loans in Louisiana
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Louisiana loan laws in general govern title loans. Lending is considered a privilege in Louisiana and a lender must meet with stipulated guidelines as set by the law. There is no set on the frequency with which you seek loans on your car. However, you can only have one title loan per vehicle. There is also no limit on the borrowing amount.
As per Louisiana law, title loans cannot be lower than $350 as they cannot be secured by a title. In such cases, the APR can be as high as 400%. There is no stipulated maximum or minimum loan term of title loans. However, to avoid being categorized as a payday loan, most title loans are for 60 days or more.
The repossession laws in Louisiana gives a lender the legal right to repossess the vehicle if the loan has not been repaid in full till due date. However, the laws prevent a lender from making any profit on sale of the vehicle over and above the original loan agreement.