Title Loan Rates |‌ ACFA

Title loans can be expensive. They are easy to get approved and have quick turnaround times. However, the interest rates of a title loan can reach triple digits. When weighing your options, you should be aware of fees.

What is the best rates for a car title loan?

A title loan’s interest rate is usually over 100%. Title loans and other short-term loans have a rate influenced more by your loan amount, where you live and your credit score than your credit. Rates can be affected by all three.

Limitations on interest rates for title loans in the states

You might be affected because some states or cities have caps on the amount a lender can charge you for a title loan.

California, for example, caps interest rates at 3% per month. This translates into 36% annually. Arizona has interest rates that range from 10% to 17% per month, depending on how much money you borrow. This is roughly 121% to 206% annual interest.

Title loan APRs vs. Interest Rates

When weighing the cost for a title loan, the interest rate is not the most important factor. Instead, consider the APR (annual percentage rate) of your title loan.

As a percentage, the APR represents how much interest and fees you would pay over a year. Comparing loan offers with similar terms and amounts can be easier by looking at the APR instead of the interest rate.

According to the Federal Trade Commission, the average APR for a title loan is about 300%.

You should also consider additional title loan costs

Title loan providers may charge other fees for the repayment of the loan.

  • Fees for filing liens. A lender may ask you to pay the costs of placing a lien on your vehicle.
  • Late payment fees. A late payment fee could be up to 5% of the due payment. However, it can vary by lender.
  • Fees for insufficient funds. Many banks charge fees if your bank transfer or check bounces. These fees can be the same as late payment fees or canceled checks.
  • Collection fees. Your lender may charge you a fee if your loan is not repaid and your car is taken away. The fee is usually added to the loan amount and paid when your vehicle is resold.

Many lenders don’t advertise fees and rates online. To find out the exact costs, you might need to call ahead or visit the storefront in person.

MUST READ

The Consumer Financial Protection Bureau no longer requires lenders to assess your ability to repay a loan. This could lead to falling into a cycle of debt. You should carefully review your finances and determine if the loan amount is within your budget.

Before taking out a short-term loan

High-interest rates and high fees can lead to a vicious cycle of debt, including auto title loans, installment loans, and payday loans. Some borrowers find themselves borrowing a second or third loan to pay off the first one.

Before you apply for a short-term loan, consider other options:

  • Resources. Many local charities, non-profits, and government agencies offer financial assistance and assistance with rent, food, and utilities for those in greatest need.
  • Payment extensions. If you are behind in payments, talk to your bill providers for a more extended payment plan.

Rates for single-payment and installment title loan

There are two types of title loans: one payment and an installment.

What makes them different

Single-payment title loans can be repaid in one payment, typically within 30 days. These loans often have a flat fee, usually expressed as $100 per borrower.

Installment title loans can be repaid in three to three years. These loans are often accompanied by interest and fees and have lower APRs than single-payment title loans.

Cost of the type

A title loan with a low interest rate could be more expensive than an individual-payment loan because of the time it takes for interest to accrue.

The installment title loan is more expensive overall, as you can see. It’s cheaper in the short term, so you won’t have to refinance or rollover your loan.

Rolling over a title loan costs

Repaying a title loan by rolling it over (also known as renewing or refinancing) means that you take out a new loan to allow you more time to pay it off. This is common for single-payment title loans. You pay the exact fees and rates each time you renew your loan. Some states have restrictions on how many times you may rollover your loan.

A Consumer Financial Protection Bureau study found that only 12.5% of borrowers can pay off their loans without having to roll it over. Nearly half of borrowers renew loans 10 times or more.

This increased cost can make it more difficult to repay the debt. 20% of title loans end up in repossession.

Is a title-loan right for me?

Although a title loan may seem expensive, it is a viable option for financing certain situations such as:

If you need money quickly, Title loans can get you funds within 30 minutes. Payday loans are the only type of loan that can provide such a fast turnaround. They tend to be smaller in amount and have higher APRs.

If you have bad credit, title loan companies typically accept all credit types. You might not have to check your credit before you apply for no credit-check loans.

If you don’t own a bank account, some title lenders will work with you.

Suppose you require a longer-term loan. The amount of the title loan will depend on your vehicle’s value and where you live.

Bottom line

A title loan can be expensive and could result in you losing your vehicle or getting into a cycle of debt. Consider how much money you are willing to borrow before you submit your application. Also, think about whether an installment or single-payment loan is more affordable.

Questions frequently asked

What will a title loan do to my credit score?

No. No. Title loans have very little or no impact on credit scores if they are repaid on time. This is because title loan providers don’t usually report repayments to credit agencies.

It could also affect your credit score if the loan is placed in collections. This will be reported to credit bureaus. If your lender does a hard credit check, your credit score may drop briefly.

What happens if I am unable to pay off a title loan?

The lender will repossess your car. However, it all depends on where you live.

Lenders may require that you repay the loan over several months to some states. If you can still repay the loan, the lender will retake your vehicle and sell it at an auction to pay the amount owed, plus the costs of repossession.

Some states allow lenders to keep all the profits from auctions, while others require that the lender give you the remainder.

Can I sell my car with a title loan?

It’s possible, but not always easy.

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