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11 Rules That Car Title Loan Lenders Must Follow
A car title loan allows you to borrow money using your car as security for a loan. You normally have to hand over your car title to your lender as collateral or security so that if you cannot manage to pay the loan, then the lender will take possession of your car.
For most car title loan lenders, handing over your car is not necessary. All you have to do is submit all your identification details, including contact details and passport photos, and your car’s title in order to have access to the loan.
Even though the common name for such loans is car title loans, legally they are actually called motor vehicle title loans. By law, a motor vehicle is a term used to include vans, trucks, motorcycles, cars, mobile homes or any other road worthy vehicle that can be legally driven on public streets and highways.
Motor vehicle title loans are usually categorized as short term loans since the life of the loan is usually a period ranging between 4 months and one year. The interest rates on car title loans are generally very high averaging at around 300% per year.
The laws or rules for car title loans in the states where they are allowed may be slightly different, but there are some commonalities that can be found amongst most of these states. Find below some of the laws and rules regarding what car title loan lenders can and cannot do when lending out to customers.
1. What car title lenders cannot do
Motor vehicle title loan lenders cannot:
1. Get money from you through automatic payments from your bank account. If they ask you to do so, you should decline and probably look for a different lender.
2. Lend you money on your car’s title that has lien.
3. Ask you for further collateral or security apart from your motor vehicle.
4. Lend you money if they know that you have another car title loan, whether it’s with the same car you are offering as collateral or not.
5. Ask you to take up a car title loan in order to settle a different debt with the car title lender.
6. Lend money to an active member of the military or their dependents.
7. Be deceptive, unfair, misleading or fraudulent.
8. Refinance or extend a car title loan.
2. What car title lenders must do
Motor vehicle title loan lenders must:
9. Have the agreement in writing to include the loan amount, repayment schedule, interest rate, any other fees, monthly payments, your mailing address and car details.
10. Indicate in bold clear writing, on the loan agreement, that you can decline or cancel the loan before the end of the next business day.
11. Allow you to pay the full loan before its due date.
The rules mentioned above are a general guideline for what you should expect when taking up a car title loan. If you are in a particular state, you should find out what the rules are for that particular state. For example, for car title loans in Santa Clara, you should find out what the car title loan rules or laws are in California.
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