Automobile Title Loans: What Consumers Need to Know

Automobile title loans are often marketed as short-term solutions for people who need quick cash but may not qualify for traditional loans, often due to lower credit scores. These loans require you to use your automobile’s title as collateral. Keep in mind that the loan amount is usually less than the automobile’s value. If you miss payments or default on the automobile title loan, the lender can repossess your automobile.

For loans under $10,000 made under a California Financing Law License, interest charges are capped. However, current state law does not limit rates for loans of $10,000 or more, making automobile title loans potentially significantly more expensive. The law also requires lenders to treat you fairly and honestly, which includes fully disclosing the interest you will pay. Always review the loan terms carefully before signing any contract. 

Tips for Consumers Considering an Automobile Title Loan

• Borrow only what you can afford to repay in full when the payment is due. This amount may be less than what you qualify for. 
• Know your rights: Your contract must clearly disclose all interest charges, the annual percentage rate (APR), and any fees. The final agreement must be in the language in which you negotiated it. Read the contract thoroughly and make sure you understand all terms before signing. Once signed, you are legally responsible for meeting its obligations. 
• Be aware: Some lenders use remote engine shutdown devices that can disable your automobile if you miss payments. These devices may also include GPS tracking. 
• Understand the cost: While these loans are quick and easy to obtain, the convenience can come at a high price to consumers. 
• Verify the lender: Email DFPI or use the DFPI self-service portal to confirm a company’s license before entering into an automobile title loan agreement.