Title Loan Rules And Regulations
Car Title Loan Regulations By State
Title loans can be a valuable resource for someone who doesn’t have access to normal lines of credit or prefers not to utilize them. However, they’re a touchy subject due to the risks involved with a title loan. While there are no comprehensive federal regulations on car title loans, there’s a patchwork of laws that differ from state to state.
Some have unique requirements before you can secure a title loan, while others outlaw title loans or severely restrict them. As of 2021, here at the current title loan regulations for each state.
State Title Loan Regulations 2021
Online title loan regulations vary wildly by state, but you can divide all 50 states into three groups. The first group consists of the states that ban title loans outright, which bar you from using your car as collateral to secure a loan. The next group is the exact opposite and consists of legal states where the restrictions on title loans are fairly minor or even nonexistent. Currently, 46 of the 50 states fall within one of these two groups, but there’s also a third group; the loophole states.
The loophole states are an unlikely grouping that consists of California, Louisiana, South Carolina, and Kansas. They’re roughly similar in that the spirit of the law was meant to prohibit or all-but-ban title loans, but left gaps by which lenders can operate.
States That Ban, Restrict, or Omit Car Title Loans
Some states don’t allow title loans at all, with twenty-nine making them illegal or heavily restricted while four have legal loopholes. If you live in one of the following states, you might not be able to access a title loan.
- New Jersey
- New York
- North Carolina
- North Dakota
- Rhode Island
- West Virginia
While these states might not allow title loan lending, you can still potentially get a title loan from within one of these states. Some have title lenders that operate within low interest caps, as opposed to the 300% APR that’s common in some states. You might also be able to find a lender by crossing state lines or by signing up with a company that offers online title loans, but that’s not a guarantee.
States with Lax Title Loan Regulations
While there are seventeen states where online title loans are largely allowed, it’s worth dividing these into two groups. The first group consists of those with modest restrictions, such as caps on the cost and duration of a title loan.
- New Hampshire
One frequent point of content is what happens if the recipient of the loan fails to repay it and the lender resells it to pay off the title loan. In Alabama and Georgia, the lender not only gets to repay the loan but is also able to pocket the surplus value of the vehicle. In most states that allow title loans, the lender is only able to use the sale to make up the value shortfall and must pay the surplus back to the borrower.
States with No Cap on Title Loans
Title loans are a credit-check-free, responsive, and fast-acting method of gaining an injection of capital. As such, they can often come with considerable interest rates and a high APR. This is doubly true in the following states, which allow lenders to offer title loans with no limits on value or interest.
- New Mexico
- South Dakota
While these states are rightly perceived as less strict on lenders when it comes to regulations, they do come with a motley assortment of prohibited practices. For instance, title lenders in Virginia may not offer a car loan to active duty service members. The legal codes of each state are filled with such idiosyncrasies and minor details that any lender or loan-seeker will have to become familiar with.
Title Loan Loophole States
The loophole states have each passed laws against the high APR and terms that are common in title loans but have shortcomings in their legal framework. In each of the states in question, it’s possible to offer title loans by complying with or working around the restrictions that are in place.
In Kansas, title loans are not formally allowed and recognized by credit law. However, licensed online title loan lenders are able to bypass this restriction by restructuring title loans. Offering such loans under the auspices of open-ended credit allows lenders to sidestep regulations fairly easily.
South Carolina and California are of course two states, but they both employ the same method of attempting to prohibit car title loans. That is, they restrict interest rates for all loans below a certain value with the intent of stopping people from offering car title loans. However, there’s a simple workaround in that lenders can simply offer title loans at and above this threshold.
Louisiana requires title loans to have a minimum sum of $350 and offer a two-month term, rather than the one-month term that’s the norm in many states. However, title lenders in Louisiana comply with these regulations and go on offering title loans.
Title Loan Regulations in Your State
While title loans can sometimes be risky, they can also represent the infusion of money that you need right when you need it most. If you’re interested in learning more about title loan regulations and opportunities, Highway Title Loans is the resource you’re looking for.