Before you take out a title loan you’ll want to see if this form of lending is legal or prohibited in your State. There are variations and different ways you can use the collateral from your vehicle as a loan. Put simply, car title loans allow consumers to borrow against the current equity of their vehicle. Typically, cars older than 10 years are ineligible for these types of loans because a car’s value decreases over time. It should be noted that this type of loan is not available in every state and that there are some states have lending tools that are similar to a car title loan but are available through legal loopholes.
Difference Between A Car Pawn Loan vs. Car Title Loan
There is a major difference between a car pawn loan and a car title loan. With a car pawn loan you leave your car at the pawnshop and lose access to your vehicle until the loan is repaid. With a car title loan, you still have access to your car, but the company that has loaned you the money has ownership over your car’s title until your loan is repaid.
State Requirements for A Title Loan
Each state has different loan criteria that they are looking at in order for borrowers to be eligible for a loan. Here are a few pieces of paperwork that you may need before requesting a loan.
• Proof of ownership and a clear title-You must be able to show that you’re the sole owner of the car that you would like to request a loan on.
• Proof of income-It’s not enough to prove that you own the car, it must be clear that you can repay the loan. Proof of income would include some of the following: pay stubs, bank account activity, alimony and other types of income received on an ongoing basis.
• Identification-Do you have a valid picture i.d.?
• How old are you? Some states allow individuals as young as 18 to apply for one of these loans.
• Pictures of your car-Is your car in good condition? If you’re applying for an online car title loan, do you have photos that prove your car is in good shape?
• A vehicle that is considered eligible-Does your car qualify for a car title loan?
You may find that your lender may request additional information from you. In some cases lenders may also request a credit check. Again, this depends on the regulations in your state.
Car Title Loan Duration Restrictions
These loans can range from 30 days to 48 months. Loan duration depends on the state that you live in. Loan duration is also related to a borrower’s ability to extend their loan duration or roll over their payments. In some states, borrowers are unable to extend the loan duration. In other states they may be able to extend the time of their loan for a set number times. It is up to the borrower to understand the loan terms.
Default and Car Repossession
The most important aspect of requesting a car title loan is committing to understanding the terms of the agreement that you’re going into. Be clear on what will happen if you expect that you may be late for a payment, what your rights are as a borrower, and what will happen if you’re unable to pay your loan back in full.
Lenders in this situation have possession of your car’s title and are able to use that as collateral against the loan and will have the ability to use your car as a way to pay for your loan if you’re unable to.
States that Allow Car Title Loans
If you’re wondering if your state allows borrowers to request car title loans, below is a list of states that do.
Alabama-Is currently regulated by the Alabama Pawnshop Act which details all of the regulations for the industry as well as borrowers rights and what they should expect if they apply for a loan.
Arizona-Regulates their car title loan industry via the Motor Vehicle Times Sales Disclosure Act. Please note that the interest rate charged on your loan depends on the amount that you borrow.
Delaware-Car Title Loan regulation currently falls under Delaware code title 5 §§ 2250 et seq.Consumers may request loan rollovers for a maximum loan term of 180 days.
Georgia-The Pawnbroker Law under code §§ 44-12-130 et seq. sets the lending regulations for Georgia. These regulations set terms specific to the amount of interest charged.
Idaho-The Idaho Title Loan Act stipulates that lenders be licensed in order to lend car title loan products.
Illinois-Under the Consumer Installment Loan Act, Illinois caps the limit of a car title loan to $4,000.
Texas-The Texas Finance Code requires full disclosure of loan terms prior to a borrower signing for their loan.
Mississippi-Under the Title Pledge Act Mississippi borrowers are limited to borrow an amount of $2500.
Missouri-Currently, the Pawnbroker Loans Act allows individuals to borrow a maximum of $5,000.
Nevada-The Nevada Revised Statute states that loan amounts cannot be more than 25% of your pre-tax earnings.
New Mexico-For those of you in New Mexico, the Small Loan Act lending maximum terms may be somewhat confusing. Before requesting your loan, spend time reviewing your lender’s terms.
South Dakota-Under the South Dakota Title Loan Laws allows borrowers to renew their loan 4 times or up to 120 days from the time of requesting the initial loan.
Utah-Car Title Loans fall under the Title Lending Registration Act in the state of Utah. Lenders must be registered with the Nationwide Multistate Licensing System and are regulated by this licensing body.
Virginia-The Virginia title law currently prohibits borrowers from taking out duplicate loans when they have a current loan outstanding.
Wisconsin-Under Statute 138.09, borrowers must pay their loan in full no later than 6 months from the initial loan date.
If you’re not sure about car title loans being available where you live, you can do a basic Google search to discover the status of car title loans in your state.
Car Title Loan Loophole States
Currently, there are 4 states that allow car title loans due to a loophole in the state’s regulations.
• South Carolina-Loans are typically made for a minimum of 30 days, but borrowers do have the ability to roll over the loan for a maximum of 6 times. South Carolina’s car title loan regulations fall under the Section 37-3-413 code of law.
• Kansas-Borrowers in Kansas may request two additional extensions of the loan term. Refer to the following statute Kansas statute chapter 16a article 2 for more guidance on the regulations
• California-Recently passed regulations now cap the interest rate at 36% for car title loans originating in California.
• Louisiana-Lenders set all terms related to short-term borrowing and lending in the state of Louisiana. The minimum amount allowed to be borrowed is $350
If you don’t see data related to your state, please be aware that regulations do change periodically.