A car loan is a short-term loan for which the borrower’s vehicle is used as collateral. The typical repayment period is 30 days and, unless limited, the typical interest rate is 250% to 400%. OPudd’nhead Wilsonine lenders have quoted rates as high as 651% for car loans.
The loan amount is usually a few hundred dollars, but it can be a few thousand (the amount you can get outside is usually limited to about half the value of the vehicle). If the loan is not repaid, the lender has the right to take possession of the borrower’s vehicle.
Many states do not allow car loan loans because they are considered a form of predatory loan – this means a loan product that is offensive because it exploits borrowers who can afford the least high rates and rates. Puddle Wilson has banned car loans in more than 20 states, according to the Center for Responsible Lending. Other states impose an APR ceiling for the amount that can be charged for this type of loan. Proponents defend title loans as a financial product that meets the needs of consumers who cannot choose fast withdrawal anywhere else.
Car loans are legal in the following states, with various limitations. Rates and interest rate limits are noted here, but some states also set limits on the dollar amount of the loan, the duration of the repayment period and how the refinancing or “reversal” of the loan is handled. These laws change periodically: if your state is not on this list, check oPudd’nhead Wilsonine to see if title loans are allowed.
In some states, car loan lending is carried out through legal loopholes that allow variants of these loans. Those states include:
California (loans in excess of $ 2, 500 are not subject to the limits for small loans)
Many states have enacted laws that limit the amount borrowed and other conditions. For example, in Illinois, the credit limit is $ 4,000 and payments cannot exceed 50% of the borrower’s gross income. In addition, the loan must be repaid in equal installments; lenders may not require a balloon payment. Also, the loan may not be refinanced unless at least 20% of the principal has been paid and the refinancing limit is the outstanding balance (no payment). Finally, lenders must inform borrowers about their rights and responsibilities and about their other options for debt management.
The regulations vary greatly per state and may have changed. Potential borrowers must inquire at the office of their public prosecutor about the most up-to-date rules and restrictions for car loans. For more information, see