Car Title Loan Laws And Regulations By State
Car title loans can be a valuable resource for someone who can't qualify for a personal loan or cash advance. However, they're a touchy subject due to the risks of a title loan and the fact that your vehicle can be repossessed if you miss the required payments. Also, the interest rates are generally high for title loans. While there are no comprehensive federal regulations and laws on car title loans, there's a patchwork of laws that differ from state to state.
Some states have unique requirements for getting a title loan, while others outlaw or severely restrict them as of August 2024.
Title Loan Regulations & Disclosures For 2024
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 opposite and consists of legal states where the restrictions on title loans are relatively minor or nonexistent. Currently, most states fall within one of these two groups, but there's also a third group: the loophole states. All 50 states have different restrictions, and you must read the lending disclosures and title loan lending requirements before agreeing to a loan offer.
The loophole states are an unlikely grouping that consists of 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 Or Restrict Car Title Loans
Some states don't allow car title loans, 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, and some of them may have title loan loopholes that allow some form of secured lending. For example, in New York, there's little to no chance of getting a title or personal loan. New York currently caps interest rates at 16% for all loans up to 25k. This effectively limits your lending options as no lender will offer a short term loan in that state with rates that low.
- Alaska
- Arkansas
- Colorado
- Connecticut
- Florida
- Hawaii
- Indiana
- Iowa
- Kentucky
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Montana
- Nebraska
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- Vermont
- Washington
- West Virginia
- Wyoming
While these states don't allow all forms of title loans, you can still get approved with a lender in some states or find a company offering unsecured loan loans at low interest rates. You may also find a lender by crossing state lines or working with a company offering online title loans that don't require you to be a state resident. Lastly, some of these states may not allow title loans, but they offer some form of a title pawn where you can use the equity from your vehicle as collateral for a loan by pawning your vehicle. In this case, you may need to give up the car itself as collateral, and the loans generally only last for a few months.
States With Limited Or No Title Loan Laws
While there are seventeen states where online title loans are primarily 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. For instance, in California, you can borrow up to $10,000 and expect an interest rate cap of 36% from any state-licensed lender. The same is true in New Mexico as of 2022, as they now limit the interest a lender can charge.
- Alabama
- Arizona
- California
- Georgia
- Mississippi
- New Mexico
- Tennessee
- Texas
- Virginia
States That Allow Online Title Loans With No Lending Limits Or Requirements
You often don't need to prove active employment or income to qualify for a title loan. 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 without limits on value or interest.
- Delaware
- Idaho
- Missouri
- Nevada
- South Dakota
- Utah
- Wisconsin
While these states are rightly perceived as less strict on lenders regarding regulations and requirements, they come with many prohibited practices. For instance, title lenders in Virginia may not offer a car loan to active duty service members and you can't have multiple secured loans simultaneously. Each state's legal codes are filled with oddities and minor details that any lender or loan-seeker must become familiar with.
Car Title Loan Laws - Loophole States
These states have each passed laws restricting interest rates and loan amounts for short term lenders. In each of the states, it's possible to offer title loans by complying with or working around the restrictions that are in place. Here are a few examples:
In Kansas, title loan companies are limited in the interest rates they can charge. However, online lenders can bypass this restriction by restructuring the lending offer. Offering such loans under open-ended credit allows lenders to sidestep regulations.
South Carolina restricts interest rates for all secured loans. However, there's a simple workaround: lenders can offer title loans above $5,000.
Louisiana requires title loans to have a minimum loan amount of $350 with a two-month term rather than a one-month term. However, lenders in Louisiana can comply with these regulations by offering a second title loan.
Get More Info About Title Loan Lending Laws In Each State
The main takeaway for anyone looking for a title loan in the US is that these loans are regulated at the state level, and you must research when choosing a lender. Each state has different regulations, and it does you no good to apply for a title loan if you don't know if they're even legal in your state or what the lending limits are. Contact Highway Title Loans at 877-433-5454 for the latest state-specific updates regarding how much you can borrow and what interest rates to expect!
