Louisiana Title Loan Laws
Alternative doesn’t mean inferior since title loans can provide a lot more flexibility than traditional loans and can actually help a borrower in a pinch keep costs down. Of course, like any borrowing option, title loans can be abused by both lenders and borrowers, and there are certain Louisiana title loan laws in place to help protect consumers from unfair and even predatory lending practices.
The Legality of Title Loans in Louisiana
There are no explicit title loan laws in Louisiana but rather Louisiana loan laws in general that allow for loans made in small amounts and over short terms. There are regulations governing who can lend, who can borrow, how much you can borrow, how frequently you can borrow and so forth, and we’ll dive further into each of these topics in the sections ahead. The important takeaway now is that while there’s no specific title loan regulations in Louisiana, title loans are legal and there are consumer protections in place if loans are made in violation or a lender behaves badly after a loan is agreed to. In order to borrow against a vehicle title, you must:
- Be 18 years old or older
- Hold a government-issued ID
- Possess a valid vehicle title
- Own the vehicle outright
- Provide proof of income and residence
Title Loan Lender Requirements
An important aspect of Louisiana title loan laws and all state laws governing loans and lenders is that lending is a privilege and an entity must meet certain requirements in order to be eligible. These rules are in place to eliminate loan sharks and the like. The first step a lender must take in order to be in accordance with title loan requirements in Louisiana is to obtain a surety bond or establish a trust in an amount of $25,000. The provider of this trust or bond must be licensed and authorized to operate in Louisiana. Once the bond or trust is secured, the lender must then file with the state treasurer. Lenders must re-file at least once annually. If you have any doubts about a lender, ask them for documentation proving they’re in good standing or contact the Louisiana Department of the Treasury.
Title Loan Contract Requirements
When you borrow money and secure that loan with a vehicle title, you’re entering into a legally binding contract. Title loan laws in Louisiana require those contracts to meet certain requirements. Firstly, these contracts must be in writing and signed. Verbal contracts aren’t allowed for these purposes. Secondly, the contract must explicitly define the term, interest, total cost of the loan should the borrower take the full term and any relevant Louisiana title loan repossession laws as well as that particular borrower’s policies. Therefore, when you agree to a loan and before you accept any money, make sure the contract:
- Is in writing
- Indicates the loan term
- Designates the loan interest
- Specifies the total obligation
Title Loan Frequency and Amounts
Louisiana title loan laws do not restrict the frequency at which you can borrow against a vehicle title. You are, of course, limited to one title loan per title because the first lender has a lien on the title so a second cannot. There is no legal maximum borrowing amount. There is, however, a practical limit, which is generally the book value for the vehicle minus the borrower’s expected profit. Profit is achieved through repayment or through the avenues allowed by Louisiana title loan repossession laws. Louisiana does have laws that effectively eliminate so-called payday loans. Due to these regulations, lenders in Louisiana cannot give you a title loan in an amount smaller than $350.
Title Loan Interest
Loans can be for amounts less than $350 but then couldn’t be secured by a title. If not secured by a title and thus a payday loan, annual interest rates can be as high as 400 percent. Under Louisiana title loan laws, however, interest rates cannot be higher than 36 percent. Note that lenders don’t have to charge as much as 36-percent interest so it may behoove you to shop around. Also, note that while lenders can charge fees, the overall obligation cannot exceed the maximum established by law. Be mindful that some lenders will use fees coupled with lowered rates to make loans seem better than they really are.
Minimum and Maximum Loan Terms
Although the minimum term for a loan isn’t explicitly established by Louisiana title loan rules, it effectively is. In order to avoid being categorized as payday loans, most title loans have a minimum period of 60 days. One reason the state structured the law in this manner is to ensure that Louisiana vehicle repossession laws don’t kick in any sooner than a period of two months. Another point to note here is that lenders cannot penalize you for early repayment. There can’t be any fees or fines, and lenders can only charge you for the period in which the loan was outstanding. Most borrowers only need a title loan for a few days or a couple of weeks at most, and this allows for that despite laws requiring a two-month term. This is a nice balance between consumer options and protection.
Owning Your Vehicle
Earlier in the article, we indicated that you need to own your vehicle outright in order to use it as collateral in a loan. Let’s take a moment to discuss this in more detail. Whether you’re using a car, truck or motorcycle as collateral, that vehicle must be yours so that the lender can place a lien on it. If you’re leasing, then that vehicle isn’t yours at all, and if you currently have a car payment, then the bank has a lien on the vehicle, and therefore, it isn’t possible for a second lender to have a lien on it as well. If you fail to repay a title loan, title loan regulations in Louisiana give lenders the right to repossess your vehicle. Therefore, the vehicle must be solely yours so that the lender doesn’t infringe on the rights of another.
Understanding Your Repossession Rights
Louisiana vehicle repossession laws can be complex, and it would be impossible to cover all aspects here. If you fear repossession, then you should contact a lawyer immediately. Generally, as soon as the agreed end date of a title loan comes and there is still a balance remaining, the lender is in the right to repossess your vehicle. Most lenders do act fast in order to get their money as quickly as possible. If you’re unable to prevent the repossession, it’s important to note that title loan requirements in Louisiana prevent lenders from making any profit above and beyond the original loan agreement. In other words, if you owe a lender $1,000 and it sells your vehicle for $1,600, then the lender must pay you $600. Be mindful that lenders aren’t required to have your best interests in mind when selling, but most cars are sold at market and thus the natural market takes care of that on your behalf.
The information provided here was accurate at the time of writing and intended to help readers understand Louisiana title loan rules. This article isn’t, however, intended as legal advice or guaranteed to be current at the time you read it. If you require additional assistance, then the Louisiana Office of Financial Institutions is a great place to start. The website contains many great resources concerning title loans in Louisiana as well as consumer protection. You can also contact the OFI by telephone in order to ask questions and get hands-on assistance.