What is a Title Loan?
A title loan is type of personal loan that is based off of the value of your vehicle and the equity you have in it. The reason why title loans are such a valuable resource for individuals who need quick cash is because unlike more traditional personal loans that you get from a bank or online lender, title loans are not based on, and do not require a credit score check, during the application process. That means borrowers who are underemployed, unemployed, bankrupt, or are struggling with poor or no credit can still easily take out a title loan.
Title loans let borrowers take out money using a lien-free car title as collateral. While borrowers will have to trade in their title in order to take out a title loan, the vehicle that the title is connected to will remain in the owners possession. That means that if you want to take out a title loan, you will not have to worry about a change in lifestyle throughout the loan’s payment term. You will be able to drive and operate your car as usual!
How is the value of a title loan decided?
This is an important question to ask if you are interested in taking out a title loan. Because title loans are collateral loans, the value of your car title is based off of the value of the collateral you are using – that means the value of your vehicle. Typically, title loans can range in value from a few hundred to a few thousand dollars. In some cases, however, they can be worth much higher if you have a particularly valuable vehicle. In most states, title loans can be worth as much as $50,000!
When deciding the value of a title loan, a lender will typically considering factors such as the market value of your car (year, make, model, mileage, condition). Lenders typically also will ask to evaluate your car, either by photographs, video, or by an in-person inspection.
Your income also plays an important role and helps to determine how much you can borrow and at what interest rate because it lets the lender know what you can feasibly pay back within the repayment term.
What requirements do I have to meet?
This is another important question to know the answer to if you are interested in taking out a title loan. Just because you do not have to disclose information regarding your credit score and history, does not mean there isn’t a list of requirements you have to meet and information you have to divulge.
In most cases, the basis requirements of title loans in most states are that a borrower have to be at least 18 years of age, have a lien-free title to the vehicle in your name, and have proof of some type of income.
How do state laws impact title loans?
Some states have little or no restrictions on title loans, other states have strict laws on title loans, and other states have made title loans illegal altogether. If you are interested in taking our a car title loan, you will want to do some thorough research on what the restrictions are in your state. Make sure that you understand and legal obligations.
For example, in some states it is legal and common for title lenders to extend or roll-over a payment term if you should be unable to pay off your loan in full by the end of your term (it is typically a 30-day repayment term). In other states, your lender has the legal right to repossess your car after you miss a single payment.
Depending on the state in which you live, repossession laws are likely very different as well. Some states allow lenders to repossess a car immediately a default, other lenders are forced to wait a number of days to either repossess or give the borrower an opportunity to come up with the money they owe.
In some states, the law forces lenders to give the borrower an opportunity to pay off their loan even after their car has been repossessed.
On the other side of that coin, some states force borrowers to pay additional money that they owe even after their car has been repossessed and sold! Title loan laws can vary widely depending on the state in which you live. That’s why it is so important that you know the laws of your state.
If you are interested in learning about your state’s laws regarding title loans, here is a guide to help you get the answers you want.
Title Loan Laws and Statues
Alabama Title Loan Laws
The state of Alabama requires title loan lenders to be licensed. That means that they are being regulated by the state to protect you against things like fraud. That gives you a lot of power, because if you sense that you are being frauded, you can take legal action against you.
In Alabama, lenders are regulated much in the same way that pawnbrokers. That means that borrowers must be at least 19 years old. While the amount of money borrowers can take out, it will be based on income and the value of the vehicle that is being used as collateral.
In Alabama, interest rates for car title loans cannot exceed 25 percent of the loan per month. Car title loan payment terms are one month in Alabama. If you fail to pay off your loan by the end of that term, you can extend your loan to a second month, but will accrue an additional month of interest fees.
Arizona Title Loan Laws
In Arizona, you must be 18-year-old (with a government ID as proof), and have a lien-free title in your name in order to take out a car title loan. The value of a title loan is based on what the lender is willing to give, but it typically depends heavily on the trade-in value of a borrower’s car.
Unlike most states, Arizona law does not require you or your lender to keep possession of your title, but this does not stop a lender from securing a lien against it.
Arizona is one of the more relaxed states when it comes to car title laws, so the regulations are typically dependent on the regulations of the specific lender.
There are, however, some interest rate regulations. They are broken down thusly:
- For loans worth $500 or less, the maximum monthly interest rate that can be charged is 17 percent.
- For loans between $501 and $2500, the maximum monthly interest rate that can be charged is 15 percent.
- For loans between $2501 and $5000, the maximum monthly interest rate that can be charged is 13 percent.
- For loans of $5001 or more, the maximum monthly interest rate that can be charged is 10 percent.
While there are limits on how much interest you can be charged, there is no limit in terms of term length. Still, the due dates of any payment should be followed. If a borrower misses a payment by ten days, a borrower can be charged a late fee of up to 5 percent of the unpaid installment.
California Title Loan Laws
In California, title loan laws do not have any requirements that lie on the side of the lender. There are no specific requirements for the car that a creditor can accept, but it is up to the creditor what their requirements are.
Still, lenders in California tend to accept cars that are less than 10 years old and in good running condition.
Laws require that the minimum amount that can be borrowed is $2500. Anything lower is not accepted when it comes to a title loan, but that does not mean that there lenders that will offer loans of lesser amount.
When it comes to interest rates for car title loans in California, a title loan of exactly $2500 allows for the lender to charge either $50 or up to 5 percent of the amount of the loan. Anything between $2500 and below $5000 can go up to $75 per day. Any loan worth $5000 or more does not have a cap limit when it comes to interest rates.
Delaware Title Loan Laws
Delaware state laws require title loan lenders to be licensed, this means that there are regulations in place to protect borrowers from fraud and deceptive loan terms.
One of the major protections that borrowers get in Delaware is that title lenders cannot advertise interest rates lower than they are actually offering. For example, a lender cannot advertise a loan at 15 percent interest if the actual rate increases following an extension in the payment term.
One interesting bit of law in Delaware protects borrowers in the event that their car is repossessed following a default. Once a lender sells the vehicle in question, if the amount recovered from the sale is less than the debt owed, the borrowers will still not be held liable. That is a great protection for borrowers in Delaware because in many other states, a borrower will be liable to pay that difference.
Florida Title Loan Laws
The state of Florida requires title loan lenders to be licensed, that means that the state is working to protect borrowers. One great protection that borrowers in Florida have is that if a lender is not property licensed, any loan from that lender would be considered void. That means that a borrower would be entitled to recover any money paid to an unlicensed lender.
Once a borrower has decided to borrow from a specific lender, they will enter a written agreement. That agreement will include the details of the property and the names and details of the owners property. The payment term will be at least 30 days, but the borrower and lender can agree upon a longer payment term.
Beyond that, there are certain regulations when it comes to the interest rates attached to certain amounts of loans.
- An interest rate of 30 percent per year on the first $2000 borrowed
- An interest rate of 24 percent on any loan between $2000 and $3000
- An interest rate of 18 percent on any loan borrowed over $3000
Georgia Title Loan Laws
In Georgia, if you own a vehicle outright, you may be able to take out a title loan. There are no minimum or maximum amount regulations, which means that the amount of your loan will be decided entirely by a lender. The value of the loan is likely based upon the value of the car that is being put up as collateral.
In order to take out car title loan in Georgia, there are several requirements for a document to be legal and complete.
- Name and address of lender
- Notice that failure to make payment can result in repossession and loss of a motor vehicle
- Length of the loan
- The interest rate for the first 30 days of the loan
- The interest rate for each 30-day period after an extension
- Full dollar amount that must be repaid within the first 30 days and after
- Repayment date
In Georgia, during the first 90 days of a loan, any extension that a borrower may accumulate interest or additional charges for each 30-day period. The exact amount owed in addition to the loan amount, in total must be equal to at least $10 per 30-day period and no more than 25 percent of the loan amount. That means that on a loan that equals $2000 during the first 30 days, a borrower will be charged between $10 and $500 in interest and additional charges.
If your vehicle is repossessed, Georgia law states that it is legal for lenders to charge up to $5 per day in storage fees. Beyond that, a repossession fee of $50 if your vehicle is within 50 miles of the lender’s office, $100 if within 51-100 miles, $150 if within 101-300 miles, and $250 if beyond 300 miles of the lender’s office.
Idaho Title Loan Laws
In the state of Idaho, title loans and those who offer them are regulated and lenders must be licensed in order to offer loans legally.
One of the major state regulations are related to requirements of written disclosures that lenders must provide to borrowers at the time of any loan agreement. It is crucial that borrowers consider these disclosures. They include the following information:
- Title loans should be used to meet short-term cash needs and not long-term financial needs
- Borrowers will have to pay interest and fees if the loan is renewed and not paid in full at the time of the due date
- This loan may be a higher interest loan, and borrowers should consider other lower cost loans
- By taking out this loan, borrowers are risking the ownership of the vehicle being used as collateral
- If a borrower defaults, the lender may repossess and sell the vehicle
- If a borrower takes out a loan, they have until the next business day to change their mind and return the money that has been borrowed without interest charged
- If a borrower thinks the lender has violated Idaho Title Loan Act laws, they can write a complaint to the Idaho Department of Finance to file a complaint.
Another Idaho specific law is that while terms can last no longer than 30 days, if the title loan is not paid in full by the end of the term, it will automatically renew with additional interest rates tacked on. If a loan has been automatically renewed three or more times, the borrower will have to pay at least 10 percent of the balance of the loan.
Illinois Title Loan Laws
The state of Illinois regulates who can provide title loans, and there have been processes put in place in order to protect borrowers and make sure that the know their rights before they enter a legal agreement.
One of those laws include a requirement that lenders offer potential borrowers a pamphlet letting them know about debt management services that are available to borrowers. If a borrower should decide to engage in a title loan, they have to include a written declaration that they received a toll-free number for the Department of Financial and Professional Regulation-Division Financial Institutions so that they can be assisted with debt management services.
In Illinois, the value of a title loan cannot exceed $4000 regardless of the value of the car. Though this does not mean that borrowers will not have to pay more than $4000 because interest rates tacked on could very well make the whole repayment amount more than $4000.
This does not mean that a lender has to offer a borrower a loan equal to $4000. The amount that they offer is up to their discretion.
Another regulation in Illinois regarding car title loans is that the repayment amount of a loan cannot be equal to or more than 50 percent of a borrower’s pre-tax monthly income. That means that if a borrower makes $1500 a month in pretax income, they will not be eligible to take out a loan that would require them to pay more than $750 per month.
Finally, when it comes to extending or rolling over a loan, it is possible for borrowers to do so as long as a borrower has paid at least 20 percent of the principle of the loan. So, if a borrower takes out a loan worth $2000, they will have to have had paid at least $400 in order to roll over or extend their loan.
Kansas Title Loan Laws
In Kansas, title lenders are entitled to ask their prospective borrowers to meet specific requirements in order to qualify for a car title loan. Beyond that, the amount that a title lender can offer to a borrower is up to their discretion and based upon the value of the loan.
In Kansas, state law regulates what lenders are allowed to do in terms of interest rates offer to the borrower. These keep lenders from offering predatory style loans. Still, what lenders are or are not allowed to do are not required to be laid out to borrowers so it is important that they take care to read up on what lenders are and are not allowed to do in order to protect themselves.
The state of Kansas regulates title loan lenders, they do not play a role in every decision that they make. When it does come to late fees, however, the state has set up a number of hard-fast regulations. A lender is only allowed to charge a borrower 5 percent of the loan installment they a borrower was late on or $25, whichever is less.
Another Kansas-specific law regarding title loans is that while payment terms must be at least 30 days, nothing prevents borrowers from paying early. There are no prepayment penalties in Kansas.
If a borrower is unable to pay back a loan by the end of a 30 day period, they can extend the loan for only two additional 30-day periods. They are not guaranteed, however, and a lender can reject extensions. Beyond that, if a borrower does decide to extend their loan, the lender can charge increased interest rates.
Louisiana Title Loan Laws
In Louisiana, title loans are legal and regulated even though no specific title loan laws in are in place. Title loans are regulated in the same way as other short-term loans in the state and there are a number of safeguards put in place to protect borrowers from unethical or predatory title loan lenders.
Whether or not a borrower is approved or eligible for a title loan is based on the discretion of the lender. Lenders often consider factors such as value of the car, monthly income, and car insurance.
The state of Louisiana does specify the minimum amount that car title loans can be worth and that value is $350. On top of that, borrowers in Louisiana must be given at least two months to pay back their loan plus interest, but that does not mean they cannot pay it back early. If a borrower is able to pay their loan back before the end of their payment term, they will not be subject to any kind of prepayment fee. See more about this at our title loan frequently asked questions.
Mississippi Title Loan Laws
In Mississippi, a borrower must own a vehicle in full and be at least 18 years of age in order to take out a car title loan. The exact amount of money that a borrower can get from a car title vary will vary depending on the lender, but they will take things into account just like lenders from other states such as the market value of the car, the borrower’s monthly income, and whether or not the title is under a borrower’s name.
The state of Mississippi only allows car title loans worth up to $2500, and before a loan is taken out, the terms of that loan should be laid out for the borrower to see in writing. The requirements of that contract are as follows:
- Make, model, VIN, year, and license plate of the vehicle that is being used as collateral
- Name, address, birth date, Social Security Number, and physical description of the borrower
- The date that the loan will be due
- The full amount of the loan
- The full balance of what is owed at the end of the payment term
- The interest rate connected to the loan
In Mississippi, title loan agreements must be in writing and last 30 days. A borrower can choose to pay off their loan sooner than 30 days and if a borrower is unable to pay off their loan by the end of the 30-day period, an extension on the loan can be made. Any extensions on a payment term should be put in writing based on state law.
In order to qualify for an extension, a borrower will typically have to pay 10 percent of the principle of the loan, and interest owed. If a borrower is unable to reduce the amount they owe by 10 percent, the lender may, but is not required to reduce their principle by 10 percent when assessing fees. When this takes place, a borrower will still owe the full or remaining principle, but they will not be charged interest or fees on it.
Missouri Title Loan Laws
In the state of Missouri, car title lenders are regulated in the same way as pawnbrokers and other short-term lenders in the state. Still, the state does have specific laws that regulate car title lenders and the specific processes that car title lenders and car title borrowers undergo.
One requirement of car title loans in Missouri is that a loan agreement must be in writing and signed by both borrower and lender. In the contract, the borrower must give the lender permission to keep their car title as collateral, the borrower will state that they are giving security in interest in their vehicle. It must also state that the car title will be redeemed once the car title loan in paid in full.
Missouri state law also requires that a title loan cannot be for more than $5000, but the exact amount that a loan is for will be agreed to by both the lender and borrower agree upon.
In Missouri, all title loan payment terms must be for at least 30 days, if a borrower is unable to pay back their loan in full plus interest, they can request a renewal in writing. Borrowers who want to renew their payment term must be prepared to pay all the interest due at the time to receive a renewal. That means that if their interest rate is 30 percent, they will have to pay at least 30 percent of the total value of their loan in order to renew.
Here are just some of the states’ laws that are made to protect both the borrower and the lender. Car title loans can be a great help to those facing financially tough times, and it is always wise to know the laws that have been set up by your state to help regulate this type of lending and borrowing.