Alabama Title Loan Laws
When consumers are experiencing an urgent financial need, they may consider taking out a title loan. Title loans are often viewed as a short-term solution for emergency expenses. One of the reasons that many consumers rely on a title loan is the fact that unlike traditional bank loans, there are no credit check requirements for title loans. Prior to taking out a title loan, consumers should understand Alabama title loan laws.
Title Loans Lenders in Alabama
Prior to taking out a title loan, consumers should be certain that the lender they are considering using is actually licensed to issue a title loan in the state of Alabama. Title lenders in Alabama are required to pay an annual fee for state licensing.
Title Loan Rules in Alabama
Title loans in Alabama are governed under the Alabama Pawnshop Act. In 1993, title lenders were classified as pawnbrokers by the Alabama Supreme Court. Due to this, title lenders are now covered by the Alabama Pawnshop Act. Parts of that Act were deemed to be unconstitutional in 2006 by Alabama Circuit Court Judge Charles Robinson Sr. According to Judge Robinson, title companies in Alabama may charge a maximum of 300 percent in interest.
Title Loan Laws in Alabama
Among the most important things for consumers to understand when considering taking out a title loan in Alabama is that the title to their vehicle is used to secure a title loan. Based on title loan rules in Alabama, a consumer could potentially lose his or her vehicle. Title loan repossession laws in Alabama allow title loan lenders to take a consumer’s vehicle if he or she falls behind on title loan payments or violates the terms of the title loan in some other way. In the event that a borrower doesn’t fulfill the terms of the loan agreement, the title lender may repossess the vehicle, sell the vehicle, and keep all of the proceeds of the sale.
Many people often choose to take out a title loan because they need cash quickly, they have bad credit, and cannot be approved for a traditional loan. Since it can be faster to receive a title loan than a traditional bank loan, the speed offered by a title loan can also be attractive to many consumers. Title loans are not legal in all states, but they are legal in Alabama. Even so, certain title loan laws in Alabama do apply. Consumers should be sure they are fully apprised of such laws before taking out a title loan.
How Interest Is Calculated on Title Loans in Alabama
Under Alabama title loan laws, lenders may now only charge up to 25 percent interest on a title loan per month. The maximum loan term for a title loan in Alabama is one month. This means that if a consumer takes out a title loan in Alabama, the maximum interest charge will be $250 for a total cost of $1,250. If the loan is not paid in full by the due date, the consumer could be at risk for having his or her vehicle repossessed.
Alabama Title Loan Repossession Laws
Prior to taking out a title loan, it is crucial for consumers to understand under what circumstance they may lose their vehicle. In Alabama, failure to pay back the full amount of a title loan within 30 days of taking out the loan allows the title lender to take full ownership of the vehicle. This means that the title lender will be able to also sell the vehicle in an attempt to recoup the outstanding balance of the loan.
In some states, title lenders are not allowed to keep the surplus from the sale of a repossessed vehicle. That is not the case in Alabama. For instance, in the event a consumer borrowed $1,000 for a title loan and defaulted on the loan, if the vehicle is sold for $4,000, the title lender would be able to keep the entirety of the sales price. The borrower will not receive any refund.
The right to cure period in Alabama is 30 days. This refers to the maximum amount of time that the consumer has to catch up on payments on a defaulted title loan.
Consumers should be certain they fully understand Alabama title loan laws before taking out a title loan, particularly repossession laws in Alabama. These types of loans are meant only for urgent, short-term financial needs. For this reason, consumers should make certain they will be able to pay back a title loan before taking out the loan. A title lender may require borrowers to show proof of income in order to be approved for a title loan. This does not mean that an applicant necessarily needs to have a job to receive a title loan. Title loan applicants may use income from the following sources:
- Child support
- Social Security
- Workers’ Compensation
Under Alabama repossession laws, failure to pay back a title loan within the maximum time frame in Alabama could result in the vehicle being repossessed.
When taking out a title loan in Alabama, consumers should be aware of their rights. Title lenders in Alabama are required to provide full disclosure regarding the terms of the loan. Additionally, title lenders are prohibited from using any form of false advertising. Title lenders must also maintain detailed records regarding all title loan transactions. In the event that a title lender violates Alabama title loan laws, he or she may be fined up to $1,000 per violation.
Title Loan Application Requirements
Prior to completing an application for a title loan, consumers should be aware of the requirements for doing so. Borrowers may be required to have physical possession of the vehicle title. The title lender may also require the borrower to surrender possession of the vehicle title. In exchange, the lender will issue the borrower the proceeds of the loan in the form of a check, cash, or money order.
In the process of completing a title loan application, a borrower may need to provide the following information:
- Full legal name
- Contact number
- Make of the vehicle
- Vehicle model
- Vehicle mileage
Alabama Title Loan Laws and Terms
Under Alabama law, the maximum length of time that a consumer can take out a title loan is one month. The amount of money that a consumer can borrow using a title loan may vary based on such factors, as:
- Value of the vehicle
- Requested loan amount
- Term of the loan
Understanding Alabama title loan laws is vital prior to taking out a title loan.