What is an Auto Title Loan?
April 25, 2012
Auto title loans are offered by auto title lenders who offer financing options to lenders. Auto title loans are short term loans offered as advance cash after the borrower pledges his car as collateral against the loan. The cash given is only of a fraction amount compared to the actual value of the car. The amount you wish to borrow varies person to person. Generally the amount borrowed is 50% of the car value.
Auto title lenders
Cash always attracts borrowers. A transaction as simple as an auto loan can be very tempting since it involves hot cash. Auto title loans are very common in the US, but one can never be too careful. The transaction can also result in fraud and loss of your car. Lenders will tempt you by saying that loaning money is not an issue and that they own the bank and you can repay whenever you can. In reality, things are different. As soon as your paid-for-car is a possession of the lender you need to reclaim possession in future and until that is done, you can enter in a lot of financial trouble. Make sure before entering in such a transaction you vet the lender and make sure you can repay the loan on time.
Interest rates by auto title lenders
If the car is already pledged elsewhere, you cannot secure it against an auto title loan. These loans are secured loans, which means once you pledge the car you will be given 100% cash advance and in case you don’t end up repaying the amount in the given time period, the lender has the right to take possession of your car. In case of delay, if there is a mutual understanding between the lender and the borrower, the lender will charge one month interest on the outstanding amount and rollover the loan for another 30 days.
Auto loans are normally given for a period of 1 month. If an interest rate is charged and the loan is rolled over, the transaction will be very expensive for the borrower. Before pledging the car against a loan, one should be certain that the financial crunch is temporary and the loan will be repaid in 30 days to avoid any additional charges. Unlike credit card loans, car title loans have a different category for charging interest on overdue amount. In worst case scenario, the borrower has to pay up to 250% of the outstanding loan. You may think that a 25% interest on your credit card is high enough. In reality its peanuts compared to the high auto title interest rates.
Risks involved in auto title loans
If you are having a financial crunch, its difficult that you will get out of it sometime in the near future unless you have debtors who have to pay you more than you owe. Pledging your car for money that isn’t worth the value is not a wise move. You will have to provide verification to the lender including duplicate car keys, GPS tracking and proof that you won’t run away with the money and the car.
How to avoid Auto title loan risks?
Keeping an emergency fund is the only way to avoid a financial crunch life. Work harder, do extra jobs and save up to 6 months of your personal expenses to ensure if ever you reach a point where you require cash you can withdraw it. Investing the money in a savings account is a good option, since you will get quarterly profit and your investment will be safe from spending temptation as well.
Interest Rates on Car Title Loans
April 25, 2012
Car title loans are acquired by transferring car title in exchange of cash. Since they are very short term secured loans, they tend to have a large interest rate compared to other sources of credit. People going through financial crises are mostly at risk of defaulting, therefore lenders feel the need of high interest rates in case a borrower is unable to repay back in the credit period given. The lender will evaluate the wholesale market of the vehicle and will give you a loan according to what he thinks is best. In certain cases, the lender withholds your car until you return the loan. In others, lenders apply GPS tracking on cars or take duplicate keys for security.
Car title loans are becoming more and more common these days since financial institutions have limited lending and require a lot of paper work before sanctioning a loan. Car loans, on the other hand, are easy to get and do not require a lot of paper work. At the same time, this process is more risky and one may end up losing the car. These small emergency loans come with a three digit interest rate against a very nominal amount determined by the lender to be paid in 30 days. In most estates there are no specific laws hence disabling any cap on the interest rate paid by borrowers. In recent times, to minimize the amount of fraud and risk, the government in the United States has started implementing rules for some states.
Documents required for car title loans
Car title loans do not require a lot of documentation and paper work. They are fairly simple to get and do not require more than 15 to 20 minutes of your time. The lender makes sure that the car is not already pledged. The lender will require the model, make, mileage, year and title of the car and will make you sign the car title documents and hand over the cash to you. Some borrowers will also verify whether you can repay the loan or not and will require proof of regular income from a job or any other savings profit you will use to repay the debt. Less documentation and security check is one of the major reasons why car title loans are very popular in case of emergency.
Car title loans interest rates
Interest rates vary from state to state. Interest is due at each due date determined by the borrower and lender and ranges from 36% to over 100% of the outstanding amount. If the borrower is unable to pay the outstanding in 30 days, the debt along with interest will be rolled over the next month. The borrower then has to pay back the principal and the interest before he is declared as a defaulter. The government regulations limit the number of times an interest can be rolled over to avoid unlimited outstanding.
Some companies offer 20% interest rate on the outstanding loan. If you are looking for easy financing, make sure you give possession of your car to a reliable lender who will not scam you. Lenders also offer monthly payment options to repay back the loan if you can’t pay back in one big installment.
In case of default
The lender will claim possession of the vehicle in case the borrower defaults. The lender is normally not keen to take possession of the car since it takes time to find a buyer and sell the car to collect his outstanding. In case he is unable to buy a potential buyer the vehicle depreciates and looses its value at the same time.
How Arizona Auto Title Loans Work
April 24, 2012
Most of us have been in the position where we need cash to tide us over until the next paycheck. If you don’t have a friend or family member available to provide you with a loan, you have another option: an auto title loan. In most cases, all you need is a clean car title, although for larger loans, you may also need to show proof of full coverage car insurance.
The best part is that you don’t need to have a good credit rating. This is because instead of your credit history serving as proof that you will pay back the money, your car’s value is. For many with no credit history or a bad credit record, an auto title loan is one of the very few options available for getting money quickly.
Just how fast? Typically, you can complete the process of applying and being approved for a car title loan in 30 minutes or less. Here’s a step-by-step guide for how to get a title loan.
Step 1: Call Arizona auto title loan companies.
You should compare the requirements, payment terms, interest rates, and the loan value they will give to your car to see which best meets your needs. You will find that payment terms for 6 month loans vary from weekly, bi-weekly, and monthly, and you can get loans as low as $100 and as high as $50,000. Interest rates vary as well, but must fall within Arizona law.
Step 2: Find the necessary documents.
For smaller loans, this usually just means the car title, but you may also need to show proof of car insurance. The car’s title must have your name as the current owner (otherwise the owner has to be present to get the loan), and it must be free of liens. In some cases, you may be asked for a spare key, but this is illegal in some areas (such as Phoenix). You may also want to get your car in more presentable shape in order to show how much it is worth.
Step 3: Bring your car and the documents to the company.
Once at the auto title loan company, you will be asked to fill out an application. Then a clerk will inspect your car and offer you a loan amount. Typically, you will be offered the maximum amount that your car qualifies for, but you can always request a smaller loan if you don’t need the full amount. Some people find it helpful to figure out the payment amount they can afford for the loan, and then ask the clerk to base the amount of the loan on this number.
This monthly payment amount will cover only the interest owed on the loan. At the end of the six months, you will have to pay the principle all at once. This is often included in your last payment, and you always have the right to request that a payment schedule (including the amounts that you owe on each date) is provided to you in writing to ensure that you’re not confused about what’s owed when.
Step 4: Read over the terms of the loan.
This is the most important step. You want to ensure that you understand everything you are agreeing to and that you can meet these requirements. By law, the terms of the loan must be clear, so that means if you have questions, speak up! If the representative of the car title loan company is unwilling to answer, then it’s best that you take your business elsewhere. A reputable company will take the time to answer any questions you have.
Once you have completed all the required paperwork, the clerk will provide you with a check for the loan amount!
Step 5: Make the required payments.
Refer to that payment schedule and make your loan payments on or before the due dates. If you do not, you may incur additional late fees or more interest charges – and you also risk losing your car.
If you will miss or be late with a payment, it’s in your best interest to contact the auto title loan company as soon as possible to see if you can work out a favorable arrangement. Many companies are willing to work with you as long as you communicate and don’t make a habit of it.
Auto Title Loan Law in Arizona
April 24, 2012
When you need emergency cash, one option you have to get a quick loan is an auto title loan if you have a valid title that shows you own a car, truck, motorcycle, or RV. This type of loan is made against the equity of the vehicle. As long as you make your payments on time, you can continue to use your vehicle as you normally would.
The auto title loan industry is regulated by state and federal laws. These types of loans are perfectly legal in Arizona, and the state agency that licenses auto title loan companies is the Department of Financial Institutions. In the state statutes, auto title loan companies are referred to as “secondary motor finance companies.”
Interest on Auto Title Loans in Arizona
The state protects consumers by limiting the amount of interest that a company can charge on an auto title loan per 44-291(G) ARS. For vehicle loans that are $500 or less, the monthly finance rate cannot exceed 17%. The finance rate cannot exceed 15% for vehicle loans between $500 and $2,500, 13% for loans between $2,500 and $5,000, and 10% for any auto loan over $5,000.
Contract for Arizona Vehicle Loans
Per 44-287 ARS, your contract for an auto title loan needs to include the name of the buyer and seller as well as a description of the vehicle. You must also be provided with the annual or monthly financing rate in a clear manner, so if you’re confused, don’t be afraid to ask! It’s your right.
Under 44-290 ARS, you may also request that the lender provide you with a written statement that outlines the due dates and amounts for payments that are required. You also have the right to receive a written receipt for any cash payments, which can be good to hold on to in case of a discrepancy in the records.
Default and Seize on an Arizona Car Title Loan
When you default on a car title loan, you can often work out a deal to extend the loan with the borrower. However, under the law, the creditor has the right to seize the vehicle.
So what qualifies as default? This means you failed to make a payment or did not pay the correct amount. Additionally, for some loans, you may be in default if you failed to maintain car insurance or meet another requirement as stipulated in the contract you originally signed. This is why it’s important to read the contract thoroughly to make sure you understand the requirements, and don’t be afraid to ask questions. A reputable company will have no problem answering any questions or concerns.
If the unfortunate circumstances arise that the creditor needs to repossess your car, they must not “breach the peace” when they do per Arizona law. This does not mean that they have to give you notice before they repossess they car, although they do need to get a court order. Without this court order, you do not need to surrender the car, so you can always ask to be shown proof. Additionally, by law in Phoenix, the lender cannot hold onto the keys for your vehicle while the loan is being repaid.
Once the car has been repossessed from you, the auto title loan company has the right to sell your car in a public or private sale in a “commercially reasonable manner” (according to current market standards). Once it is sold, the money is used to pay back the remaining balance on the car title loan as well as any expenses that the auto title loan company incurred to repossess and sell the car. You will be provided with a notice of sale for the vehicle.
Often, you will be given the opportunity to buy the car back after paying back the money you owe, as well as any expenses that the auto title loan company incurred while repossessing the car.
Seek Further Assistance for Questions about an Auto Title Loan
If you want to learn more about the laws regulating auto title loans in Arizona, you can refer to the following links, which include major state statutes that companies must follow:
Arizona Revised Statutes (A.R.S.) Title 44, Chapter 2.1, Article 1.
A.R.S., Title 47, Chapter 9, Article 6. (Uniform Commercial Code)
You can learn more about the main federal regulations that auto title companies must follow here:
Regulation Z of the Truth in Lending Act
If you have any specific questions about an auto loan title company, such as confirming they have a valid, active license to run their business, you can contact the department directly:
Arizona Department of Financial Institutions
2910 N. 44th St. Suite 310
Phoenix, AZ 85018
Phone: (602) 771-2800
Fax: (602) 381-1225
Arizona Auto Title Loans: Interest Rates and Payment Terms
April 24, 2012
Do you need some cash to keep you afloat until your next paycheck? Or maybe you encountered an unexpected financial emergency and need cash as soon as possible to resolve it. When you need cash fast, an auto title loan can be an option, even if you don’t have good credit. All you need is a car with a clean title (and in some cases, proof of auto insurance.)
The value of the car is used as collateral for the loan. But you can still use the car as you pay back the loan. In most cases, you can apply and be approved for an auto title loan in less than a half hour.
When considering an auto title loan, two of the most important things to understand are the interest rates and payment terms. You can use this as a basis for comparing different auto title loans and finding the one that best meets your needs.
Additionally, you will need to meet these requirements as set out by your contract, so it’s important that you understand them. Missing a payment (or making an incomplete payment) can be considered a default on your loan, and this means that the auto title loan company has the right to repossess the car (although in many cases the company is willing to work with you in order to prevent that outcome).
Interest Rates for Auto Title Loans in Arizona
Arizona state law (per 44-291(G) ARS ) regulates how much interest an auto title loan company can charge you for a loan. In some cases, you may be able to find a company that charges a lower interest rate than those set out by the state, so it can be a good idea to shop around and see what your options are. But don’t be too quick to sign on for a lower interest rate – make sure you understand all the requirements involved so you get the best loan for your specific situation.
The maximum monthly finance rate you can be charged for an auto loan of $500 or less is 17%. For a loan between $500 and $2,500, the maximum monthly interest rate changes to 15%. Loans between $2,500 and $5,000 must not exceed an interest rate of 13%. And for all loans higher than $5,000, the maximum monthly interest rate is 10%.
Payment Terms for Arizona Car Title Loans
In most cases with auto title loans, the payments may include the interest only. This is why they can seem very low. However, once the loan term is over, you will be required to pay back the entire principle at once. The principle is the amount that the loan was taken out for originally. This is not always the case. Some auto title loans include the loan repayment and the interest in the payments, so you want to find out what the terms are for your loan before you sign. It depends on your financial situation which option is best for you.
Additionally, most companies offer various options for how often the loan needs to be repaid: weekly, bi-weekly, or monthly. And there will be different cut-off times and other requirements set by each company. These cut-off times cannot be earlier than 5 pm on the payment due date. You will likely be required to make the payment in U.S. dollars.
Additionally, the company can stipulate other requirements, such as:
- Checks or money orders must be sent by mail
- Specifying a specific address for payment receipt
- Requiring you to appear in person for credit card payments
Understanding the rules of the specific auto title loan company you are using is important to ensure that you get payments in on time and do not become in default on your loan.
If you are late with a payment or do not pay the total amount owed, then you can face consequences as set out by the payment terms. For example, you may incur late fees or more interest charges. By Arizona law, you cannot be charged more than 5% of the unpaid balance as a penalty. Also, these penalties must be clearly disclosed in your contract.
Even worse, the auto title loan company has the right to repossess your car if you default on the loan. By law, you have until 11 days after the payment due date to pay back the loan if you missed a payment. However, many auto title loan companies are willing to work with you if you encounter an unexpected set back.
When you are signing for your loan, you have the right to request that the lender provide you with the payment due dates and amounts in writing. This can be helpful to get to ensure you don’t miss a payment. It is also a good idea to talk to the auto title loan company about what help they typically offer to borrowers who face an emergency situation and need a little extra help.
