Continuing series: Car Title Loan Business. (Repossessions from the borrower’s perspective.)

Behind on your title loan payment? Your lender can take your car.  This is called “vehicle repossession.”

What can I do if I am behind on my payments?

If you are having trouble making your monthly title loan payment:

• Talk to your car title lender immediately. Communications are the key to avoiding a repo.
• Try to buy some time. Explain your situation – honestly. Lost job, cut-back hours, medical expense…
• Sell your car. You’ll get more money selling it yourself than allowing the title loan company to sell it at an auction. You’ll have to coordinate this with your lender because they have your title.

Must the car title loan business tell me they are going to take my car?

No. The title loan company does not have to tell you in advance that they are going to take your car.

How do I retrieve my car from the repo company?

1. Make sure your car was repossessed. Call your local police department to check.
2. Call your title lender. You may have to catch-up or pay the entire loan balance. This is unlikely IF you communicate. Your lender DOES NOT want your car. They simply want their money AND know that you’re willing to communicate with them.
3. You’ll have to pay repossession and storage fees.

How do I get back my stuff in my car?

Depends on the state/province you’re in. GENERALLY, within 48 hours from the time they take your car, the repossession company must send you a list of the things in your car and tell you how to get them back. You will have to pay storage fees to the repossession agent. If you do not pick them up within 60 days, the repo company can dispose of your stuff.

What notices should I receive?

Within 60 days after they repossess the car and at least 15 days before your car is sold, your title lender must send you a document called “Notice of Intent to Sell Vehicle” with this information:

• That they will sell your car after 15 days from the date they mailed or gave you notice.
• How much you have to pay to get your car back before they sell it.  If the notice says you have to pay in full, it has to tell you why.
• Where to make payment and pick up your car.
• That you have the right to delay the sale of your car for 10 days if you make a written request. The notice must have a form you can fill out and send back to request the extension. (Do this if you need more time to pay the fees to get your car back!)
• That you will owe them money if the car sells for less than the total amount due.
• If you don’t take action and your car is sold, you have the right to ask your title lender in writing, how much they sold the car for, and how much it cost them to sell it.

Can your car title lender refuse to return my car?

The loan company can refuse to return your car, unless you pay the full balance, if any of the following has happened:

• You lied on your credit application.
• You hid the car to avoid repossession, or threatened the repossessor.
• You trashed the car, threatened to destroy it, or used it to commit a crime.
• This is the second time your car has been repossessed in the last 12 months.
• This is the third time your car has been repossessed since you bought it.

What happens after the vehicle is sold?

You may get a letter from the title lender with an itemized bill for what you may owe under the contract plus fees, with a credit for what the vehicle was sold for. You can ask for this itemized statement up to one year after the sale. The lender has 45 days to send this to you.

Starting a Car Title Loan Business? Get the “Bible: How to Start a Car Title Loan Business!”

This car title loan advisory was issued by The California Department of Business Oversight

Exercise caution before borrowing money through an automobile title loan.

These loans require you to put up as collateral the ownership of your car. If you miss payments or default on the auto title loan, the lender can take your vehicle.

Tips for consumers considering an auto title loan:

• Borrow only as much money as you can afford to fully repay when the payment is due, which may be less than the amount you may be eligible to receive.
• You have the right to full disclosure in your contract of all interest charges, the annual percentage rate (APR) of the loan and all fees. The final contract must be in the language in which you negotiated it.
• Before you take out a loan, read the contract thoroughly and be sure you understand all the terms. Once the loan agreement is signed, you are legally responsible to fulfill the obligations in the contract.
• Be aware some lenders use remote engine shutdown devices that allow them to turn off your car if you don’t make payments. Some of these devices have GPS tracking capability.
• Although these loans are quick and easy to obtain, you pay higher prices for the convenience.
• ABOVE ALL, CONSIDER AVAILABLE ALTERNATIVES. Examples include asking your employer for an advance on your next paycheck; finding out if your bank or credit union provides short-term credit products; asking creditors for more time to pay your bills; asking for a loan from a relative or friend.

Auto title loans typically are advertised as short-term loans for people who need money quickly but may not have access to more conventional loans, possibly due to marginal credit scores. Few assets are more important to Californians’ financial security than their cars.

Borrowers who use their auto titles as loan collateral are risking that asset. That’s why we strongly urge consumers to exercise great care before taking out an auto title loan, and to try other options first. The amount of these loans typically is less than what the car is worth.

WARNING: FOR ALMOST ALL AUTO TITLE LOANS, THE INTEREST RATE LENDERS CAN CHARGE IS UNLIMITED. THIS SHOULD BE A LOAN PRODUCT OF LAST RESORT.

Current state law does not limit interest rates for consumer loans of $2,500 or more. In 2013,virtually 100 percent (99.99 %) of auto title loans equaled or exceeded that threshold. The annualized interest rate on the vast majority of these loans ranged from 70% to 100% and higher.

Even if you don’t have the protection of interest rate limits, the law requires lenders to deal with you fairly and honestly. That means they must fully inform you about the interest you will pay.

Carefully review the terms of the loan BEFORE you sign a contract!

Always check with the Department of Business Oversight on a company’s license BEFORE entering into an agreement for an auto title loan.
www.dbo.ca.gov 1-866-275-2677

Here’s a link to the original Advisory.

States Having Specific Car Title Loan Regulations and Laws:

Car title loans are legal in the following states, with caveats. Fee and interest rate limits are noted here, but some states also impose limits on the loan principal, the length of the repayment period, and how refinancing “reacts” are addressed. Car title loans are in a constant state of flux. DO YOUR HOMEWORK!

• Alabama: 300% APR
• Arizona (204% APR on first $500; 180% on the next $2,000; 156% on the next $2,500; 120% on the remaining balance)
• California: loans over $2,501 are not subject to small-loan limits. You’ll need a CFL license.
• Connecticut
• Delaware
• Florida: 30% APR [If you want strategies for offering car title loans in Florida, we know how to achieve 90%+APR’s!]
• Georgia: 300% APR for the first three months; 150% thereafter; lien fee
• Idaho
• Illinois: loan maximum of $4,000 and monthly payments not to exceed 50% of the borrower’s gross monthly income
• Kansas: considered open-end credit lines.
• Kentucky
• Louisiana: loan principals above $350 and exceeding 60 days are not limited.
• Mississippi 300% APR
• Missouri: a simple “merchant license” required.
• Minnesota
• Montana
• Nevada
• New Hampshire 300% APR; lien fee
• New Mexico
• Oregon
• Rhode Island
• South Carolina: title loans above $600 are not subject to small-loan limits
• South Dakota
• Tennessee (cost is limited to 1/5 of loan amount plus 24% APR)
• Texas (120%+ APR)
• Utah
• Virginia (264% APR on first $700; 216% on next $700; 180% on remaining balance; lien fee)
• Wisconsin

Want to know more about the car title loan business? Check out our 300+ Manual HERE

Car Title Loan Business 101: A car title loan is a high-interest, one month loan on a vehicle using the owner’s title as collateral. (Note: refer to your state/province for specifics.) Most title loan lenders require the vehicle to be absent any outstanding loans; a “free and clear title.”

Unlike a pawn loan, the beauty of a title loan is that the owner seeking the title loan still has possession of  their vehicle. However, if the owner fails to make timely payments, the title lender will repossess  the collateral. Best practices dictate that, after all repossession  fees, auction costs, re-marketing costs, etc.  are deducted from the sales price, any surplus is refunded to the consumer.

Typically, title loan borrowers pay 10% or more per month in interest! As an example, a $2500 car title loan at 10% interest/month would cost the borrower $250 per month. A 3 month loan would total $750 in interest to the lender. And, at the end of this 3 month example, the car title loan borrower would still owe the lender $2500!

It’s common practice for the lender to require, not only the monthly interest payment be paid, but that the principal be reduced by 10% or more each month as well. So, a $2500 loan at 10% per month plus a 10% reduction in the loan principal would require the borrower to pay $500 to the lender at the end of month one.

The pros for a lender are obvious. Let’s assume a California car title loan lender has been in the business 18 months and has $150,000 on the street. Average loan balance is $2501; that’s 60 total loans on the books. Not too hard to accomplish! $150,000 at 10%/month ( a very low interest rate for the industry)= $15,000 gross revenue. Assume the average title loan is 5 months in length. One employee at $8 to $12/hour plus a spiff, a 300 to 600 sq. ft. footprint, loan management software, 2% – 3% default rate, phone, utilities, advertising, annual licensing and audits, blah, blah, blah… and it’s easy to envision an owner netting $10,000/month before taxes with just one location.

One common misconception held by prospective new title lenders is that they need a storage yard, repo men, special insurance… WRONG! There are bonded, licensed repossession companies and auctions that make it easy for the lender to do nothing more than make a phone call or log in to a website to have a borrower’s vehicle picked-up, refurbished, delivered to the auction and a check mailed to the lender all sight unseen!

The cons for the borrower? Loss of their vehicle that probably has a low book value 2X the amount loaned on their collateral.

Want to know more details about car title lending? We’re car title lenders and consultants. Start here: “How to Start a Car Title Loan Business Course.”

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