January 20, 2020
How Do Car Title Loans in Alabama Work?
Car title loans are loans that you can take out against the value of your vehicle if you own your car outright. Every state has different rules and regulations regarding car title loans, and Alabama is no different. When you get a car title loan in Alabama, you and the lender must follow a number of rules to ensure that the agreement is safe and legal for both parties.
Laws do vary from state to state on lending. If you’re planning on taking out a car title loan in Florence, Alabama, it pays to know your rights.
What Is a Title Loan?
If you own property of value like a house or a car, it has value. You can use that value as collateral for a loan. A title loan company will loan you a percentage of the value of the vehicle while they hold on to the car title. You will repay the loan in a set period of time and get the title of your vehicle back.
How Does a Title Loan Company Make Money?
Like other lending establishments, a title loan company adds a set amount of interest to the loan, so when you repay the loan you’ll be paying the original amount you borrowed plus a percentage. It pays to find a title loan company in Florence, Alabama that is able to lend you the money you need through a title loan with the smallest percentage of interest possible. This means that ultimately you’ll have to pay back less.
What Is a Lien?
An important term to understand is a lien. Properties like homes, commercial buildings, and cars have ownership papers and these can have liens on them. A lien is like a note saying that the property is currently under a finance agreement.
For example, when you first buy a new car at the dealership using financing, the car title will have a lien on it stating the terms of the loan agreement. If you didn’t pay back the loan for any reason, then the dealership has the lien to show that there’s a legal reason you owe them money. If you continue to not pay back the loan, then the lienholder has a right to reclaim the property, in this case, a car.
After you have paid off the original financing of a vehicle, the car becomes yours outright, and the lien is removed from the vehicle title.
Can I Get a Car Title Loan if My Vehicle Has a Lien on Its Title?
In most cases, no. With a lien on the car title, there’s still a financial agreement in place with the original financing company. Adding a second lien onto a vehicle would be too complicated, so car title loans in Alabama are typically only available if the car is lien-free.
What Laws Govern Car Title Loans in Alabama?
Tough laws govern car title loan companies in Alabama so there’s no chance you’ll be taken advantage of. There are laws that state the maximum interest that can be charged, the rights of the lender and borrower, and proof of licensing.
Broadly, Alabama title loan providers are governed by the same rules as pawnshops. In 1993, car title loan providers were classified as pawnbrokers and most of the laws concerning car title loans, therefore, derive from the Pawn Shop Act.
How Long Can the Loan Period Be on a Car Title Loan?
Alabama has a relatively unusual loan period statute for car title loans in that loans can only be over the maximum of one month.
However, Select Title Loans is able to offer car title loans on a 30-day renewable basis, essentially allowing you to renew a loan with minimum fuss should you wish to rollover your loan to further months.
How Much Are the Interest Rates on a Car Title Loan?
The interest rates payable on a car title loan vary by provider. A provider that only loans to ‘safe’ borrowers should be able to set a lower interest rate as the overall risk to the business is lower. The amount of money and time that’s expected to be spent reclaiming and selling vehicles to recover the cost of a loan that’s gone bad would, in that case, be smaller, so overheads are lower.
On the other hand, car title loans are a lifeline for many people who can’t get credit through other means. So another car title loan provider might offer loans to a wider range of people but charge marginally higher interest rates to cover the higher potential risk.
Alabama does have a rule that says title loan lenders can’t charge more than 25% interest per month. In reality, most title loan lenders will charge a lower interest rate to be competitive with other options.
What if I Don’t Repay the Loan?
In Alabama, if you don’t repay the full amount of the loan within the allotted time (typically 30 days) then the lender has the legal right to take full ownership of the vehicle. The lender would have the right to then sell the vehicle to reclaim the money that they are owed from the bad loan.
It is therefore very important to keep on top of your repayments. Should you believe you will have unexpected problems making your car title loan repayments, you should contact the lender immediately.
Are Car Title Loans Easy to Get?
Car title loans are one of the easiest ways to get fast cash with no hassle. As no credit check is performed, all you need to do is prove that the car is yours, you own it completely, and bring some ID. You must bring in the vehicle for inspection. From there, you can get a car title loan within a matter of minutes.
Car title loans in Alabama are well regulated and represent a good option if you need emergency cash within a short period of time.