How Do Title Loans Work in My State? (Title Loan Laws By State)

December 16, 2020November 22, 2021 Doreen Jacobs

Title loans are a great way to generate immediate cash when you need it. Also known as a car title loan, you use your car as collateral. In simple words, you can borrow money based on your vehicle’s equity or overall value.

A title loan is more accessible compared to bank loans. If you have a bankruptcy on your credit report or you are currently unemployed, you can benefit from this loan because your credit rating is not taken into consideration to qualify for a title loan.

One important factor to consider is how title loans work in your state. The general rule of thumb is this:

You must over 18 years of age,
You must own a lien-free vehicle title that is under your name

In some states, there are special laws setting limits on title lenders and loan amounts or interest rates. And there are some states where title loans are completely banned.

As title loan conditions vary in different states, here is an in-depth guide on what you can expect depending on where you live.

Alabama

In the state of Alabama, you must be at least 19 years old to take out a title loan. All lenders must be licensed as the state is regulating them to avoid cases of fraud. Any loan you took from an unlicensed lender is deemed invalid. False advertising is also not allowed – check out how to spot that here.

Coming to the allowed title loan amount, it is up to the lender and it is mostly based on the value of your vehicle and your income.

According to the law, the lender is not allowed to charge the borrower with more than 25% of the loan amount.

Delaware

Lenders must be licensed in Delaware. There is also a rule stopping lenders from advertising a lower interest rate initially and then increasing it after a loan renewal or extension period. The date of repayment cannot be later than 180 days.

Furthermore, there is no maximum interest rate set in Delaware. The lender is authorized to take the title of your vehicle until you repay them. However, you can keep using your car.

In case you fail to repay the lender, they will repossess your vehicle and, to cover the cost, may sell it. If they get any excess money from the sale, the title loan lender is obligated to pay the amount back to you.

Georgia

If you own a vehicle outright in Georgia, you can easily get a title loan. There is no limit on the maximum or minimum loan amount. The lender and borrower can set the amount depending on the value of the vehicle and your income.

In the first 90 days, you will be getting charged every 30 days. Every 30 days, you cannot be charged interest that is more than 25% of the loan amount. If the loan period is extended to more than 90 days, the lender can’t take interest of more than 12.5% in addition to the loan amount from you.

The lender must disclose all the fees he or she is charging you. You also receive a grace period of 30 days in case you failed to make a payment. After those 30 days are up, the lender can begin the repossession process lawfully.

Arizona

In the Grand Canyon State, you need to be 18 years or older, with a lien-free title under your name. Depending on the value of your car, you can borrow any amount the lender is willing to give.

One difference in the state of Arizona is that you and the lender are not required to keep possession of the vehicle’s title. Overall, there are minimum legal requirements from the state government.

There is no limit on the duration of the loan. Also, remember that in Arizona title loan lenders are not under any obligation to notify you if and when you have defaulted on your loan.

Idaho

There is no maximum amount you can borrow with a title loan in Idaho. The title loan amount is determined by the lender. However, a license is crucial for the lender here.

The two parties also must draft a written agreement on all the agreed terms, conditions, and rates as well as the date of payment.

The period of a title loan is 30 days in Idaho. Upon defaulting on the loan, the lender will mail you a 10-day notice to make the payment.

If you still fail to pay, the lender may repossess your vehicle, and charge you for any additional expenses they faced in the process.

New Mexico

The state of New Mexico does not have many regulations when it comes to title loans. There is an age requirement of 18 years or older. The title loans in New Mexico also allows the lender to ask for a spare key for your car.

There is a $2,500 limit on the amount you can borrow in the state. Also, you can receive about 30-40% of your vehicle’s current market value. However, there is no cap on the interest rate on the title loan. The common loan term is for 30 days.

In the case of default, you do not have much protection in New Mexico. In fact, your vehicle may be taken for repossession on the same day without any notice.

New Hampshire

According to the laws in New Hampshire, the maximum amount you can borrow is $10,000. Compared to other states, this is actually one of the higher amounts.

The state has placed a limit on the interest rate charged every month at 25%. The loan term length in New Hampshire is only one month. However, you can negotiate to extend the term by paying at least 10% of the loan principal.

If you fail to pay, the title loan lender can repossess your vehicle at any time after the default has occurred. After repossession, your car may get sold soon after as the lender is not required to give you a grace period.

California

In California, only a licensed lender can give you a loan. There are not many specific requirements in the Golden State. Lenders prefer a vehicle that is not older than 10 years.

State laws do require a minimum borrowing amount of $2,500. Furthermore, there is no limit on how much the creditor can charge you.

Generally, if you miss the loan payment, your vehicle can be taken by the creditor even if you are one day late. They also are not obligated to notify you first.

Texas

In Texas, there is a requirement for full disclosure about the loan upfront and all other information such as the Annual Percentage Rate (APR) and any other fees.

The term of the title loan in Texas is limited to 180 days or 5 loan renewals at maximum. This way, the state minimizes any risks and assures the safety of both parties involved.

There is no restriction on the amount you can take out. But the rate of interest charged depends on where the title loan lender is registered in the state.

Kansas

In Kansas, lenders have the right to ask borrowers for a few different pieces of information to verify the borrower’s eligibility. The amount you can borrow is also up to the lender and they can estimate it according to your vehicle’s market value, your income, or any other factor they deem important.

Kansas officials also regulate title loan lenders to ensure they don’t use any predatory tactics. In the case of late payment by the borrower, the state restricts the lender from charging you more than 5% of the delayed loan installment.

The borrower generally has 30 days to repay the lender. Now, if you live in Kansas and you want a title loan extension, you can receive two extension periods of 30 days—but this is subject to the lender’s approval.

Illinois

In the Land of Lincoln, title loan lenders are legally bound to inform the borrower of their rights as well as responsibilities. Plus, lenders must give you a pamphlet with information on debt management services available to you.

In fact, once the agreement is made, the contract must include a statement saying you have received the toll-free number of the Department of Financial and Professional Regulation Division of Financial Institutions.

In Illinois, no matter how much your income, the title loan amount cannot exceed $4,000. The interest or additional charges can be added to this amount, though.

Another rule is that the borrower cannot take a loan for a monthly amount that exceeds 50% of their pre-tax income.

South Dakota

According to South Dakota’s title loan regulations, your loan period should be less than 30 days. Loan renewal can also occur up to 4 times. However, in this case, you must pay 10% of the loan plus interest. Lastly, there is no maximum amount you can borrow.

Wisconsin

When it comes to Wisconsin, the maximum amount you can borrow is 50% of your vehicle’s market value. Additionally, there is no cap on the interest rate the lender might ask for.

Title loan terms can go up to 6 months in this state. In case of non-payment, you must receive a 20-day notice before repossession.

Florida

Title loan periods in Florida start at 30 days. If agreed by the lender and borrower, the period can be extended once or twice. Any extension agreement must be added into a new contract and all parties must sign again.

If you don’t make the title loan payment within 30 days of your extension, then the lender has the right to repossess your vehicle.

They may sell it to recover the lost amount. However, the lender must notify you 10 days before the repossession.

Louisiana

Title loan laws are not especially strict in Louisiana. One rule to be aware of is this: title loan lenders cannot charge you more than 36% interest.

You can also extend your title loan agreement period up to one year. The request should be given before the due date.

In case you don’t pay, and your vehicle is repossessed and sold, you will receive the excess money.

Mississippi

There is a maximum amount for title loans allowed in Mississippi. You cannot take a loan of more than $2,500. In addition, the title loan lender is not eligible to charge you more than 25% of the loan amount every month.

If you want an extension, you must pay 10% of the principal of the loan plus interest. If your loan has defaulted and the vehicle is sold for less than what you owe, you are not liable for any remaining balance.

Missouri

In Missouri, a written agreement must be signed by both parties to be eligible for a title loan. According to state law, you can’t take a loan exceeding $5,000.

You will get at least 30 days to repay the title loan amount plus charges. After missing the payment, the repossession process will begin after 10 days. You will then receive a notice and have 20 more days after this date before a repo agent comes for your vehicle.

Conclusion

As you can see, title loan laws vary by state. Title loan agreements and maximum amounts are some of the factors to pay attention to as you cross state lines. As always, ask questions and know the law before you sign your name on the dotted line.