If you own your car, you are eligible for a car title loan. Car title loans use the vehicle as collateral, and are often granted within minutes of applying. There is no need for a credit check, and lenders often grant up to 50% of the car’s value with no problem. These types of loans are not for everyone, but if you are strapped for cash and none of the alternatives seem to be options, this may be the right type of loan for you. Before signing on to the loan, however, make sure that you are aware of these regulations to protect yourself.
1. Usury Laws
The definition of usury is charging an interest rate above the rate allowed by the law. Laws vary from state to state regarding a cap on interest rates, and some states do not have a cap. Be sure to research your laws before signing a loan. Interest rates for car title loans are always high due to their short-term nature, but looking into your local usury laws can save you a few percentage points. It is illegal for lenders to charge above the local usury rate, so take the time to check it out.
2. Read Your Contract
The Truth in Lending Act, a 1968 federal law, was aimed to make contracts regarding the lending of money clear and understandable. The contract should be made in clear terms, and if there is anything you don’t understand, you have the right to question it before signing the agreement. This law also gives you the right to cancel the loan, should the right circumstances exist. Brush up on your legal lingo and look into this act to learn your rights as a borrower.
3. Look for Loan Covenants
Many lenders will attempt to put in extra requirements and fees that the borrower will have to complete before the loan is paid back, and until all of the covenants are met, the loan will remain in place. These covenants must be listed in the contract that is signed. Before submitting to extra fees, make sure that they are indeed listed on the contract you have signed.
4. Check Local Loan Limits
Some states limit the amount that can be borrowed for a car title loans – in Illinois there is a $4,000 limit, but in California there is no limit on the amount that can be borrowed. Make sure that you do not accept a loan for more than the legal limit, or you may be forfeiting your rights for legal protection should the lender try to do anything illegal.
5. Check Processing Fee Laws
Some states also legislate processing fees on car title loans. Depending on the loan amount, the lender may be limited on how much they can charge in extra fees. To save money, research your state laws and hold your lender to them.
by Ethan Leak