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There are many states that still have their own laws and restrictions for car title loans. This means that the laws in one state might be different than the laws in another. Every state has their own set of laws based upon their own financial situations and how they affect their residents.
Are Title Loans legal?
Today, in most states it’s easy to get a title loan online in a few minutes. You are allowed to borrow urgent amount of cash the same day just by using your title as collateral and filling out a simple application online. For example, you are likely to take out no inspection online Title Loans in Texas without any restrictions. The lender will just check the value of your vehicle, verify all the required documents you provide and offer you instant financing within 1 – 2 business days. The interest rates and repayment terms will largely depend on your credit score, creditworthiness, the necessary amount, and similar factors.
Car Title Loans Laws and Regulations by State 2022
Title loans are a type of loan that is regulated differently by state. They’re available in some states, but not all. Most of the time, these loans are made to people with bad credit, so if you have a bad credit score, then you may be eligible for this type of loan. Since they’re only available in some states and not others, it’s important to know the regulations within your own state.
- Generally, title loans can be divided into three groups. The first category is comprised of states where title loans are illegal.
- The next category is comprised of legal states with heavy restrictions on title loans or no restrictions at all. Lastly, there are “loophole” states like Louisiana, South Carolina, and Kansas. These states outlaw title loans as well but have left loopholes through which lenders can operate anyway.
- And the third group consists of states which allow Title Loans with no caps or limits.
Title Loans are Illegal in Some States
Some states have outright banned personal installment loans and car title loans online. They are:
- New York
- North Carolina
Doing this was a step in the fight against predatory loans. Other states allow these loans, but have capped interest rates artificially to limit opportunities for lenders. California is one example of this. You can get California Title Loan completely online but the interest rates will be capped at 36%. This is good on paper, but it’s now difficult to find a lender as most companies have stopped lending in the state because of these new restrictions. Hard to say if their efforts will be successful in the long-term, but it’s for sure that there will be more discussion about the regulation of auto title industry over the next few years.
States Where You Can Get A Title Loan With No Limit
Title loans are a credit-check-free, responsive, and fast-acting method of getting a significant amount of cash by using your car as collateral. They can often come with considerable interest rates and a high APR. However, even the strictest states for title loans tend to allow a limit on value and interest. For instance, Delaware only allows lenders to offer title loans up to $250,000 with no APR. Missouri allows them up to $5,000 with an APR of 36% (or between 3.5% and 25% if it’s an agricultural loan). The list goes on–the following is a table of the states where there are no limits on these two aspects of a loan (value and APR): Idaho, llinois, Missouri, Nevada, New Mexico, South Dakota, Utah, Wisconsin.
Where Lenders Can Use Loopholes to Offer Car Title Loans Regardless Restrictions
Some states are fighting to legislate against car title loans. The law usually does its work, but has loopholes.
- In Kansas, for example, there’s a restriction on state regulations recognizing online title loans. But by restructuring the loan, online lenders can bypass these restrictions.
- Another example is in South Carolina. In South Carolina, the law requires title loans to have a value of $700 or more, but an easy workaround is to offer loans that are above that threshold.
- Louisiana requires a minimum amount of $350, but lenders there meet this requirement and still offer title loans.
What Restrictions Are Still Imposed on Car Title Loans in 2022
According to Star Loans, we’ve accumulated the most essential Car Title Loan limitations in every state in the table below. The regulations mostly concern loan amounts, interest rates and terms.
|California||Auto title loan has a capped interest rate of 36%. In California, loans of $2,500-$10,000 have a 36% interest charge. Under AB 539, rates for loans under $2,500 are capped at 30%.|
|Kansas||Kansas limits auto title loans to $2,500 per year and a maximum annual interest rate of 36%. Kansas’s loan terms are 30 days and can be extended twice.|
|South Carolina||South Carolina offers loans for the fair market value of the car for a period of one month. There is an origination fee of 7%-56% which can include an origination fee of 7%. The cost includes interest charges as follows: $2.50 per week for loans of $150, $25 per $100 up to $600 for loans of $150 to $2,000, $18 per $100 on loan amounts from $600 to $1,000 and finally, 12% per $100 on amounts from 1,000-2,000.|
|Louisiana||Louisiana allows loans of at least $350 with no maximum, two-month terms, and a 36% maximum interest rate.|
|Minnesota||Minnesota aspires to be a leader in consumer protection. They address the negative financial implications of title loans with a loan limit of $1,000, but the fee limit is not mentioned. The fees depend on the amount borrowed. I would recommend consulting their website if you’re interested in what the fees are.|
|South Dakota||South Dakota has strict regulations with regards to title loans up to $500. You can renew for an additional term as long as you pay down 10% of your original principal amount each time and any finance charges due. The maximum APR is 36%.|
|Florida||In Florida, there is no maximum loan amount. The interest rates are up to 30%, 24% or 18%. The maximum APR is 12 times the monthly rate. Title loans are for a maximum of 30 days, and they can go for 60-day periods.|
|Oregon||Oregon also allows for auto title loans and doesn’t specify a maximum loan limit. The terms must be at least 31 days, but not more than 60 days. On top of the one-time origination fee, an annual interest rate of 153.77% may also be charged. With all these fees, the APR is limited to 153.77%.
What are the Latest Changes in Title Loan Regulations?
There have been some recent legal updates in the car title loan industry. Over the course of the next few years, we’ll see regulations come in to place in many states. As it was mentioned by the Federal Trade Commission, the new legislation will hopefully protect the industry and their consumers. Much like what we saw with installment loans, most states limit the number of lenders. They also set a minimum amount that any resident can borrow.
We saw similar changes happen in California. An example of these new laws taking effect is seen with rulemaking changes in California. The State already has extensive regulatory requirements for lenders. To get started in this industry, there needs to be a lot of capital and legal proceedings. This restricts lending options to people who need them the most.