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If your small business needs a quick cash infusion, you might be considering a title loan. Perhaps you’ve even wondered about online title loans. This article explores that option.
Title loans are illegal in as many as thirty states. Online title loans are hence also illegal in these states. Most of the other states where it is legal to obtain a title loan have specific laws regulating such lending. A few states do not have a specific law pertaining to these types of loans. Other prevailing laws regulating private lending are applicable for title loans, too.
Legality by State
Traditional and online title loans are legal in Arizona, Alabama, Delaware, Idaho, Georgia, Illinois, Mississippi, Texas, Missouri, New Mexico, Nevada, South Dakota, Utah, Tennessee, Wisconsin, and Virginia.
Four states do not have any particular legislation or statute legalizing or outlawing title loans. This creates a loophole in the laws regulating lending in those states that title companies use to their advantage. These four states are California, South Carolina, Kansas, and Louisiana.
Regulating Online Title Loans
Online title loans may be deemed illegal if the terms of lending violate state law. It is worth noting that there is no federal law pertaining to title loans. Every state has the prerogative to have its own laws. A majority of the states where these loans are legal have regulations in place. That is, they put caps on loan amounts, rates of interest, and repayment terms. This includes renewals and procedures for seizure and possession of the vehicles that borrowers put up as collateral or security.
Most states do not have caps on all aspects of the loan. Many states do not make it imperative for lenders to adhere to any maximum rate of interest or loan amount. There is sufficient leeway for lenders in many states to go for a short or a long repayment term. However, most car collateral loans are offered with a short term of repayment. You will not get these loans with a repayment term of less than thirty days or exceeding one hundred and eighty days.
Recourse for Borrowers
Title loans that have terms violating the state law will be deemed illegal. Borrowers can file a lawsuit against such lenders. When they do, the entire loan will be deemed null and void.
In short, borrowers don’t have to repay the loan if they have been taken advantage of. Borrowers can also renege on the loan if the lenders have not operated as per the state law. However, this liberty does not exist in some cases where the law is rather ambiguous.
For instance, in states where there are no strict provisions regarding loan amounts, rates of interest, and terms of repayment, there is little scope for borrowers to seek legal recourse. This is true even if the borrower feels they have been treated unfairly.
States where title loans are offered using a loophole in the law are not very favorable for borrowers. That’s because the provisions or terms of lending are in a sort of gray area. This is why many people prefer loans in states where the regulations are stringent. However, in many states only residents are legally eligible for title loans, including online title loans. A few states do not make this imperative.
Limitations of Online Collateral Lending
According to TitleLoansFAQ.org, you cannot complete the entire process of applying for title loan using a website or app. You will have to visit the nearest office or branch of a lender. Alternatively, you will have to get one of the agents of the lender to physically inspect the vehicle you have.
You can also get title loans in Michigan, where you will be able to use the equity that you have in your car to get some fast money. They are not based on your credit score, but they use the equity in your car to determine how much money you will qualify for.
Moreover, an agent must also verify the documents serving as proofs of identity, address, income, and the ownership of your vehicle. These physical inspections are imperative and nonnegotiable. In reality, you can apply for online title loans. However, an actual physical correspondence is necessary to obtain loan approval and disbursement.