Title Loan Laws
Throughout the United States, there are laws covering what lenders can and can't do. Title loan companies must follow the title loan laws set by both their individual states and the federal government. The only federal title loan regulation of note, though, is the age minimum of 18 for borrowers.
In all other areas, states get to set the guidelines on title loans. This guide will cover how title loan laws work throughout the country, with special attention paid to Florida's laws. There are a few key aspects of title loans that differ from state to state, and all of them are covered below.
The loan term, which is not to be confused with the terms of the loan, is how long the loan lasts. In general, title loans are designed to be short-time funding options that you receive, and then pay back within a month. That's why in most states, title loans have terms lasting 30 days. States requiring terms of different lengths are few and far between.
Loan extensions are allowed with car title loans. Certain states choose to cap the number of times a borrower can extend a title loan. For example, Texas sets the absolute maximum for title loan terms at 180 days. Florida has no such limit in place.
How much you're able to borrow when you get a title loan depends on what your car is currently worth. To figure that out, a lender will look at the following:
- Your car's model year
- Your car's make and model
- Your car's mileage
- Your car's current condition
They will then set a maximum loan amount based on their appraisal of your car. There is one other factor that can affect how much you borrow, though, and that's any state limits on title loans. Some states cap title loans at a certain dollar amount. Others, Florida included, don't limit title loan amounts at all.
The interest rate is how much you pay the lender for borrowing the car title loan. Many states haven't put any cap on the interest rates title loan companies can charge. The states that have capped this either do so by monthly or yearly interest rate. For example, there are multiple states that have title loan interest rate limits of 25 percent each month.
Florida has just about the lowest interest rates you'll find for title loans. The max annual percentage rate (APR) a title loan company can charge in Florida is 30, 24 or 18 percent depending on whether the loan is for $2,000 or less, more than $2,000 but no more than $3,000, or more than $3,000.
Texas is another state that has a fairly low interest rate limit with a cap of 10 percent. The thing about Texas title loans is that lenders can add other fees, as well.
The worst-case scenario with a car title loan is that you miss your payment and default on it. The lender's recourse in this situation is to take your car from you and sell it. In many states, they can do this immediately. In others, there are stricter repossession guidelines. Florida is one such state, meaning if you're looking for Orlando title loans for cars, you'll have some protection in the event of a default.
Here's the procedure a Florida title loan company must follow to repossess and sell a car:
- Wait 30 days after the due date of the payment you missed, giving you a chance to catch up.
- Send you written notice that they plan to come repossess your car and allow you to turn it over to them.
- After repossessing your car, the lender must send you written notice 10 days or more before selling your car.
States also vary in what happens after a car is sold. Some states have title loan laws that allow lenders to charge borrowers for deficiency balances, while other states don't. Some states also require lenders to send borrowers surplus balances, while others don't.
Knowing How Title Loans Work in Your State
If you're considering getting a title loan, the first thing you should do is look up the title loan laws in your state. This will give you a good idea of what to expect. Fortunately, lenders are typically also required to provide all the pertinent title loan information to you when you borrow with them.