Nevada Title Loan Laws

Nevada Title Loan Laws

The federal government sets very few laws of its own on the title loan industry, which means that the majority of the regulation on the industry occurs at the state level. While Nevada title loan laws have become better for borrowers with the passing of some new legislation, overall the state doesn’t offer much protection. If you’re thinking of getting a title loan in Nevada, here are the rules and regulations that you need to know.

Title Loan Laws in Nevada

In Nevada, the chapter of the Nevada Administrative Code (NAC) that covers the state’s title loan laws is Nevada 604A. For any questions regarding title loan rules in Nevada, that is the most up-to-date and accurate source of information. Nevada 604A covers multiple types of short-term, high-interest loans, including car title loans and payday loans.

While title loan companies could once operate without any sort of license in the state, Nevada title loan laws now require all lenders to receive the proper licensing. Title loan companies need a Nevada installment loan license to operate in the state, and they need to have their licensing information posted in a visible area at their office. They also need to make sure the fees and interest rates they charge are also posted in a highly visible location to make those clear to borrowers.

Title loan companies can’t make more than one title loan at a time to the same borrower. This prevents them from offering you a second title loan to pay off your first, which would mean more money for the title loan company but put you in an even worse position financially.

How a Title Loan Works in Nevada

It’s important to know how a title loan works to have a full understanding of it. When you get a title loan, you’re securing the loan by putting your car up as collateral on it, which means that the title loan company can repossess your car if you default on your loan. The entire loan is based on the value of your car, so whether or not you get approved and the amount that the title loan company will lend you are both determined by your car’s current market value. The title loan company won’t run a credit check on you, and you can typically get your money the same day that you apply for the loan. For these reasons, title loans tend to be very popular among high-risk borrowers with bad credit scores who don’t have any other loan options available.

The convenient application process is the biggest selling point of title loans. Here is the basic process for how you can obtain a title loan:

  1. Go to the title loan company’s office, taking your government-issued ID, your car title and your car with you.
  2. Fill out the required paperwork and allow the title loan company to perform a quick vehicle inspection.
  3. Give your car title to the title loan company and receive your loan.

Title loan companies advertise that they can get people in and out of their offices in as little as 30 minutes, which tends to be an accurate estimate. While many companies offer online title loan applications, you still need to visit them in person to handle most of the application process.

As far as the documents that you need to obtain a title loan are concerned, the government-issued ID is to verify your age to the title loan company. One of the few federal title loan laws on the books is one that requires all borrowers to be at least 18 years of age or older. You need your car title so that you can provide it to the title loan company for the duration of the title loan. When you’ve repaid your title loan in full, you’ll get your car title back. The title loan company inspects your vehicle to determine its current market value.

Your car title must be lien-free, meaning the car is entirely paid off without any outstanding loans on it, and in your name.

Nevada title loan laws also specify that as the borrower, you have one day to rescind the loan without any sort of penalty. After you obtain the loan, you can rescind it as late as the close of the next business day. To do so, you can either provide the title loan company with the check it issued you, or an amount equal to what it loaned you. This is a standard form of protection that most states have, but it at least gives you the chance to change your mind if you have second thoughts about your title loan.

Title Loans in Relation to Gross Income

Title loan laws in Nevada require that the title loan company considers the income of every borrower and makes sure that the loan payment won’t be too much for a borrower to handle. According to Nevada 604A, a title loan payment cannot exceed 25 percent of the borrower’s gross monthly income.

Because of this regulation, a title loan company may require you to bring in proof of your income. A paystub, a bank statement or any other form of income verification will all work. There may be title loan companies who accept an estimate of your income provided by you, or even don’t ask about your income at all, as title loan companies that don’t play by the rules are fairly common.

Maximum Title Loan Amounts in Nevada

Title loan rules in Nevada don’t limit the dollar amount that a title loan company can lend out. They do stipulate that title loans can only be issued for up to the fair market value of the car that’s being used as collateral on the loan.

This rule doesn’t have any effect on title loan companies or you as a borrower. The fact of the matter is that no title loan company would issue a loan for more than the fair market value of the car, anyway. Title loan companies want to be able to get their money back through repossessing and selling cars if the borrower's default on their title loans. This means that they need to limit title loans to a percentage of the car’s value to play it safe and be able to cover both the loan amount and the interest that they’re trying to recover. Generally speaking, you can expect to see most title loan companies issue loans for up to 30 or 40 percent of a car’s current market value.

Nevada title loan laws provide you with a bit more flexibility to get a loan as large as you need, compared to other states that set their maximum title loan amounts at 2,500 dollars, 5,000 dollars or another number. However, the vast majority of title loan borrowers get loans for hundreds or a couple thousand dollars, anyway.

Title Loan Interest Rates in Nevada

One of the worst aspects of Nevada title loan laws for borrowers is that the state hasn’t put any cap on title loan interest rates. This leaves title loan companies free to charge as much as they want, and they take advantage of that. For title loans in Nevada, it’s common for borrowers to pay a monthly interest rate of 25 percent, which is equivalent to an annual percentage yield (APR) of 300 percent.

Nevada is far from the only state to avoid putting any sort of limit on interest rates for its title loans. Many states don’t have a limit, and even among states that have title loan interest rate limits, those limits are still typically very high. It’s common to see states set interest rate limits of 20 to 25 percent per month, which is barely better than having no limit at all.

Term Length for Title Loans in Nevada

Nevada limits the term length of its title loans to 30 days, which is a standard time frame for title loans across most of the United States. Unfortunately, this term length typically doesn’t work out that well for borrowers. Let’s say that a borrower takes out a title loan for 1,000 dollars at that aforementioned monthly interest rate of 25 percent. After 30 days, a borrower who was in a bad enough position that they needed to borrow 1,000 dollars through a title loan company now needs to come up with 1,250 dollars. The short payment terms of title loans leave most borrowers unable to pay off their loans.

And that’s why there are title loan extensions available. The title loan company will also allow you to extend your loan, which is also known as rolling over or renewing the loan. To extend the loan, you pay only the interest instead of the entire amount, and a new 30-day term starts up. Of course, this new term also carries a new interest charge of that same 25 percent.

Because of the way that title loans are set up, it makes it very likely that borrowers will need to extend their loans multiple times and pay large amounts of interest. It’s difficult for a borrower to pay such a high amount after only 30 days, but it’s far more likely that the borrower will have at least enough money to pay off their interest. So, borrowers fall into this pattern of only paying the interest while never touching the loan principal, which means the loan will never be repaid.

Title loan laws in Nevada allow a maximum of six extensions on a title loan. The problem for borrowers is that if they’re still unable to pay off their loan, it means that the title loan company will repossess their cars. Using the previous example, if the hypothetical borrower who took out a 1,000-dollar title loan paid only their 25-percent interest charges for six months, they would have paid 1,500 dollars total, but the title loan company could still repossess their car.

Defaulting on a Title Loan in Nevada

If you fail to make your payment on your title loan, then the law considers you to be in default on that loan. While the title loan default laws are similar to Nevada payday loan default laws, a lender can only send your loan to collections for a payday loan. For a title loan, they can take your car.

While the most common way for borrowers to default on their title loans is by failing to make their payments, any violation of the terms of a title loan contract constitutes a default. For example, if the title loan contract requires you to maintain insurance on the car and you do not, then you have defaulted on the loan even if you’ve been making your payments. It’s less likely that the title loan company will repossess your car for that reason, though.

The statute of limitations for a title loan is the same as the payday loan statute of limitations Nevada, which is six years for a written contract. Verbal contracts have a statute of limitations of four years. It’s unlikely it will be years after a default before the title loan company takes action, as they typically get moving quickly.

Car Repossession Laws in Nevada

Fortunately for borrowers in Nevada, its car repossession laws actually provide a decent amount of protection. After you default on your title loan, the title loan company must send you written notice at least 30 days in advance of repossessing your car. During this time frame, if you can catch up on your payments, then you can prevent repossession. You essentially have at least another 30 days from when you missed your payment to handle it.

However, failing to rectify the payment issue will result in the title loan company repossessing your car. The title loan company does need to allow you to get any personal belongings that you had in the car. Before they sell the car, they must provide you with notice at least 15 days in advance and offer you a repayment plan for what you owe. The amount you owe can include your loan principal, your interest and any repossession expenses that the title loan company incurred.

Once the title loan company sells your car, that’s it. If the amount of the sale doesn’t cover the amount that you owed, the title loan company cannot come after you for the deficiency balance. In many other states, title loan companies are able to bill borrowers for deficiency balances when the proceeds from car sales don’t cover them. This can certainly add insult to injury – you pay hefty interest charges to a title loan company for months, and then when you can’t extend the loan anymore, the company repossesses your car. After it sells your car, it sends you another bill. At least thanks to car repossession laws in Nevada, you don’t need to deal with this.

Situations When the Title Loan Company Can Sue You

There are a few select situations when the title loan company can sue you in civil court. Those situations are as follow:

  • You intentionally concealed your car from the title loan company to prevent repossession.
  • You intentionally damaged your car before repossession to either prevent the repossession or reduce the amount of money the title loan company would be able to get for the car through a sale.
  • You committed loan fraud by providing false information on your title loan application, such as doctoring a car title when the car wasn’t actually in your name.
  • You committed fraud by transferring the car title to another person after obtaining the title loan, so the title loan company wouldn’t be able to proceed with the repossession.

In the event of loan fraud, the title loan company is able to sue you for the amount of the loan, reasonable attorney fees and other legal costs.

There’s a difference between concealment and standard use of your vehicle in the eyes of the law. If you drive your car like you usually would after defaulting on your title loan, that’s not considered concealment, since it’s just standard use. To be guilty of concealment, you would need to take clear steps to prevent the title loan company from finding the car. Any damage to the car has to be intentional for it to work against you in court. If you get into an accident, that doesn’t apply.

The Controversy Behind Title Loans in Nevada

Title loans tend to be a hot-button issue for any state that allows them, and the same is true in Nevada. Lawmakers have been trying to put limits on title loan interest rates, although even when states have limits in place, they’re often so high that it barely makes a difference.

Supporters of title loans, which consist primarily of those in the title loan industry, claim that these type of loans provide financial assistance for borrowers who are unable to get a loan through a more traditional financial institution, such as a bank or credit union. They also say that they need to charge high interest rates because they’re lending money to high-risk borrowers who are more likely to default on their loans.

Both of these points may be true, but high interest rates don’t begin to describe title loans. The APR on a title loan can be ten times as high as what would be considered a high interest rate on a credit card or a loan through a bank. The title loan industry is set up to make huge profits on the backs of people in desperate financial situations, and it does just that. While title loan companies are lending money to high-risk borrowers, they also have built-in protection if borrowers default on their loans, in the form of repossession. They’re still taking a risk each time they issue a loan, but being able to repossess and sell a borrower’s car substantially lowers that risk.

How Title Loans in Nevada Stack Up to Those in Other States

When it comes to comparing the states that offer title loans, Nevada is on the low end of the spectrum, although it shares that position with quite a few other states that either don’t cap title loan interest rates or cap interest rates at an amount so high that it barely even matters.

The lack of interest rate limits combined with the short 30-day terms make it a risky proposition to borrow a title loan in Nevada, as it’s easy to get stuck in a cycle of debt. The fact that the state limits title loans to six extensions doesn’t provide much assistance to borrowers. It keeps them from getting trapped in a never-ending pattern of paying interest on a title loan balance that doesn’t go down, but it also makes it very likely that title loan companies will just be repossessing borrowers’ cars after seven or eight months.

Car repossession laws in Nevada are one of the few areas where the state excels and has a fair system set up to protect both borrowers and lenders. For borrowers, they receive plenty of notice about the impending repossession, giving them time to prevent it by making their payment or to arrange for other means of transportation. They also have time after repossession to make their payment and get their car back instead of having it sold off. If the car is sold, the title loan company can’t sue the borrower for any deficiency balance. For lenders, they have protection against borrowers concealing or damaging their cars before repossession.

Ideally, you don’t want to end up borrowing a title loan anywhere. You won’t be getting a particularly good deal with a title loan in Nevada, but it’s also not much worse than you’d be getting anywhere else.

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