If you have bad credit or no credit, you may find yourself thinking about various types of cash-advance loans. Car title loans are those offered by a vendor for which you sign over the title of your car in return. There's generally no credit check to get a title loan, and you only need to meet low-income requirements. However, title loans are known for having extremely high rates of interest and must be paid back quickly. As of 2010, there are 16 states that do allow car title loans.
States That Allow More Than 300 Percent APR
States that allow car title loans also set the amount of interest that a vendor may charge. Certain states allow vendors to charge 300 or more in annual percentage rates (APR) for car title loans. APR can be defined in different ways, but it typically means that APR is the interest rate you actually pay on the title loan. Needless to say, an interest rate of 300 percent or more is a huge amount. States where car title loans are allowed to charge 300 percent APR or more are Georgia, Alabama and Mississippi. Montana formerly allowed triple-digit interest rates, but on November 2, 2010, voters approved a ballot initiative to limit all small consumer loans, including car title loans, to no more than 36 percent.
States That Allow Less Than 300 Percent APR
All car title loans aren't as high as 300 percent. In other states, title loans must charge considerably less, although they're still not considered low-interest loans by any stretch of the imagination. Minnesota allows for the lowest amount but still lets vendors charge up to 118 percent APR for car title loans, while Arizona allows much more at 207 percent. Virginia comes close to 300 percent at 264 percent APR, and Tennessee comes closest of all with an APR of 268 percent.
States With No Limit on APR
Several states have no limits on how much a title loan vendor may charge. By federal law, these lenders must disclose to you what the interest rates are in terms of annual percentage rate, but they may try to make this rate seem smaller by expressing it as a monthly interest rate. You may also need to pay a number of fees for the loan, such as lien fees, late fees, document fees and processing fees. States that have no limit on the amount of APR you may be charged for a title loan are Utah, Nevada, Idaho, New Mexico, South Dakota, Missouri, Illinois and Delaware.
- Center for Responsible Lending: Montana Rejects 400% Interest Debt Traps
- Federal Trade Commission Consumer Information. "Car Title Loans." Accessed Dec. 17, 2019.
- Navy Federal Credit Union. "Car Title Loans: What You Need to Know." Accessed Dec. 17, 2019.
- Consumer.gov. "Car Title Loans: What to Know," Accessed Dec. 17, 2019.
- Consumer Financial Protection Bureau. "Single-Payment Vehicle Title Lending." Accessed Dec. 17, 2019.
- Consumer Financial Protection Bureau. "My Car Has Been Repossessed, and I Was Told It Will be Sold," Accessed Dec. 17, 2019.
Amber D. Walker has been writing professionally since 1989. She has had essays published in "Fort Worth Weekly," "Starsong," "Paper Bag," "Living Buddhism" and more. Walker holds a Bachelor of Arts degree in English from the University of Texas and worked as an English teacher abroad for six years.