New Mexico Title Loan Laws
When it comes to title loans, there are only a small number of federal laws, as for the most part the government allows states to set their own rules and regulations. Because of this, title loan laws can vary drastically from state to state. Some states are stricter on title loan companies, while others place few restrictions on them. New Mexico title loan laws fall into the latter category, as the state doesn’t have many regulations regarding title loans. If you’re considering borrowing a title loan in New Mexico or you just want to learn more about New Mexico lending laws, here’s what you need to know.
The Title Loan Process in New Mexico
Title loan companies in New Mexico are licensed under the New Mexico Small Loan Act. When you obtain a title loan, you’re using your car as collateral to secure the loan, which means that the title loan company has the right to repossess and sell your car should you default on the loan. Because your car is the basis for the loan, its current market value will determine both whether or not you’re approved for the loan and the maximum amount that the title loan company will lend to you. This means that there isn’t any credit check to obtain a title loan, which is one of the reasons these types of loans are so popular. The other reason is the quick application process.
You can obtain a title loan by going through the following steps:
- Go to the title loan company’s office with your car, the title to it and your government-issued ID.
- Fill out the necessary title loan paperwork.
- Allow the title loan company to perform a vehicle inspection of your car.
- Give the title loan company the title to your car.
- Obtain your loan.
The process is as fast as it sounds, and many title loan companies advertise that they can have you in and out of their offices in 30 minutes or less.
One of the few guidelines the federal government has instituted regarding title loans is a requirement that all title loan borrowers be at least 18 years of age or older. This is why the title loan company needs to see your ID before it can issue you a title loan. While your car is the collateral on the loan, you get to keep that throughout the term of the loan, and all the title loan company keeps is your car title. Some title loan companies will also want a spare key to your car, and title loan laws in New Mexico do not prohibit this.
When you’ve repaid your title loan in full, the title loan company returns your car title to you and your spare key, if it required you to hand one over.
Many title loan companies now offer online applications on their websites, as well. However, these aren’t necessary and are actually almost always a waste of time. The application form will typically ask for your vehicle information, including the year, make, model and approximate mileage, along with your contact information, including your full name, email address and phone number. While the title loan company may say that it can pre approve you for a title loan online, the application process at its office will still be exactly the same, so this doesn’t save you any time. All you’re doing is providing the title loan company with your contact information, which means you’ll likely receive a call from one of its representatives, who will attempt to convince you to come in and get a title loan. If you’re already planning to get a title loan, this is unnecessary, and if not, it’s an annoyance.
Maximum Title Loan Amounts in New Mexico
Since title loan companies in New Mexico operate under the New Mexico Small Loan Act, they are only allowed to issue loans up to 2,500 dollars, which makes this the maximum amount that you can borrow through a title loan in the state. Of course, whether or not you can borrow this much will depend on the current market value of your vehicle.
When you bring your car into the title loan company, they will plug its information into a car value guide, such as Kelley Blue Book. Then, they’ll perform that vehicle inspection to see which condition your car falls under, and use that to set its value. This value will determine how much you can borrow. Keep in mind that no title loan company is going to issue you a loan up to the value of your vehicle, instead it will set the amount it’s willing to lend you by a percentage of your car’s value. This percentage varies for each title loan company, but you can typically expect to borrow up to around 30 or 40 percent of your car’s current market value. title loan companies do this so they can make sure that they recoup their losses, including the amount of the loan and any unpaid interest, through a sale of the car.
The 2,500-dollar loan limit set by New Mexico lending laws is on the low end compared to most other states. Some states have similar limits, but many have higher limits, such as 5,000 dollars, 25,000 dollars or no limit at all. However, this isn’t necessarily a bad thing, because with the high interest rates charged on title loans, it’s not a wise idea to take out a large loan anyway. The vast majority of borrowers also don’t need title loans for more than 2,500 dollars, so this is one of the New Mexico title loan laws that doesn’t have a major impact on borrowers.
Title Loan Interest Rates in New Mexico
Now we get to one of the problems with title loan rules in New Mexico. The state doesn’t set any sort of cap on title loan interest rates, so title loan companies are free to charge as much as they want. And they definitely take advantage of this.
While every title loan company sets its own interest rates, one thing they all have in common is that their interest rates are sky high. With no cap on interest rates, it’s common for title loan companies to charge 25 percent per month. That’s the equivalent of an annual percentage yield (APR) of 300 percent. Considering a loan through any financial institution would be considered high interest if it had an APR of 36 percent, the amount of interest that title loan companies charge is truly staggering. If you borrow a title loan for the maximum amount of 2,500 dollars, you’ll end up paying 625 dollars in interest every month.
In all fairness, title loan interest rates are extremely high in almost every state that offers them, so this isn’t something that’s exclusive to New Mexico installment loan laws. Florida is one of the few states that has regulations in place limiting title loan companies to charging somewhat-reasonable interest rates. New Mexico certainly isn’t alone in not doing anything to rein in title loan companies, as many other states also don’t put any kind of cap on title loan interest rates. However, it’s still part of some bad company and doesn’t provide any protection to its borrowers.
There have been attempts by lawmakers to make changes to title loan laws in New Mexico to put a limit on interest rates. In 2014, there was a court case against multiple companies offering high-interest, short-term loans, and the New Mexico Supreme Court found that the interest rates that these companies were charging was unconscionable. Despite this, it has been difficult for lawmakers to make any sort of headway regarding title loan companies. The title loan industry is powerful politically and makes significant campaign contributions, which is one reason it’s been allowed to remain unchecked in so many states.
Title Loan Terms in New Mexico
New Mexico lending laws don’t put any sort of limit on the term length of title loans in the state, which makes it one of the few states that doesn’t limit this. However, it doesn’t have much of an impact for borrowers. The most common term length limit for title loans is 30 days, and this is the standard length that title loan companies issue their loans in New Mexico and most other states anyway. Even without any term limit under the New Mexico Small Loan Act, chances are your title loan in New Mexico will have a term of 30 days.
These short terms are one of the biggest issues with title loans when combined with their high interest rates. A term of 30 days doesn’t give you much time to come up with the money to repay your title loan. If you needed to borrow a title loan for 2,500 dollars at the start of the month, how likely is it that you’ll have an extra 3,125 dollars lying around at the end of the month to pay it back?
But of course, the title loan industry does provide you with another option, because if it just repossessed people’s cars after one month, it wouldn’t make the kinds of profits that it does. If you can’t pay back that title loan on the due date, you have the option of extending your loan, which the title loan company may also refer to as a renewal or rolling over the loan. What this means is that you only pay the interest charges on the loan, and then you carry over the loan principal to a new term that lasts another 30 days. Of course, the new term also has a new interest rate for the same amount as before.
This puts you in a very difficult position as a borrower. Using the aforementioned example of a 2,500-dollar loan, you may not have the full 3,125 dollars you need to pay back your loan principal and its interest. It’s far more likely that you’ll have 625 dollars which you can use to pay back your interest and keep your loan going. But when are you going to have enough to actually pay back the loan? What typically ends up happening is borrowers will keep paying only their interest, paying huge amounts in interest charges to the title loan company without ever making a dent in their loan principal. Because of lack of awareness and often a lack of transparency on the part of the title loan company, many borrowers aren’t even aware that the payments they’re making aren’t bringing them any closer to paying off their loans. It’s a vicious cycle of debt that takes advantage of people who don’t have any other options.
The average title loan borrower has their loan for eight months. On that loan of 2,500 dollars, that would mean you’ve paid 5,000 dollars in interest, double the amount that you originally borrowed. And if you reach the point where you can’t make your title loan payment, the title loan company can then come in and take your car.
Defaulting on a Title Loan in New Mexico
New Mexico title loan laws are similar to laws across the nation when it comes to defaulting on a title loan – if you don’t make your payment, then you’ve defaulted on the loan. It’s important to realize that depending on your title loan contract, there may be other ways that you can default on the loan. For example, some title loan companies will include in their contracts that you must maintain insurance on the car that you’re using as collateral. If you don’t do that, then that is also considered a default. However, the most likely situation where the title loan company will actually take your car is if you don’t pay up.
New Mexico Title Loan Repossession Laws
When it comes to repossession, title loan rules in New Mexico also don’t provide borrowers with much protection. While many other states require that title loan companies provide borrowers with a grace period after a missed payment or send a written notice of the impending repossession, neither of these are required in New Mexico. The state allows the title loan company to send in the repo man as soon as you’ve defaulted on your title loan.
New Mexico title loan repossession laws do require that the person repossessing your car doesn’t breach the peace in any way, although some elements of this are open to interpretation. It may be breaching the peace to trespass, but what about going onto your property to tow away the car? A repo man certainly couldn’t throw you out of your car, and they are also supposed to allow you to remove any personal belongings before going through with the repossession, if you’re around when the do it. Otherwise, the title loan company is supposed to allow you to pick up those personal items. Even with New Mexico title loan laws that prohibit breaching the peace, each repo man will conduct himself a bit differently. There was one particularly tragic incident where a title loan borrower was shot several times by a convicted felon that the unlicensed repo man brought with him to repossess the car. That felon claimed that the man he shot had been reaching for a weapon, although his story was hard to believe, since he first told police he couldn’t see what the man was reaching for and then later said the man was reaching for a gun. Fortunately, the victim survived the shooting, but this still stands out as an important cautionary tale.
After the title loan company repossesses your car, they don’t need to wait around to sell it or even provide you with any notice. Other states require that title loan companies give borrowers a right to cure, which means a set amount of time to catch up on their payments and get their vehicles back. There’s no such luck in New Mexico, where the title loan company could sell your car the day they repossess it, if they so choose. Even if they provide you with the opportunity to catch up on your payments, you’ll likely need to pay the full loan balance, which includes the loan principal and interest, along with any repossession fees the title loan company incurred.
How New Mexico Title Loan Laws Stack Up to Those in Other States
It’s clear that New Mexico is not a good place to get a title loan. The state has some of the laxest title loan laws in the nation, providing very little protection to borrowers. While there have been attempts to change this by lawmakers, so far those attempts haven’t had any success. Other states typically have at least some type of borrower protection at one point or another in the title loan process, whether that is interest rate limits, a grace period where the title loan company must wait before repossessing a car or a right to cure, but New Mexico has none of these. If you’re going to obtain a title loan in New Mexico, it’s imperative that you pay it back. Otherwise, you’re likely going to lose your car.
Considering all the drawbacks, why would anyone get a title loan? The title loan industry preys on the desperate, which means high-risk borrowers who can’t get a loan anywhere else and need money right away. If you need money and a bank or a credit union won’t issue you a loan, you can go right to one of the title loan companies that are located on almost every corner and get cash in your pocket in half an hour. These companies make themselves the most convenient option to lure in borrowers.
Supporters of the title loan industry often claim that title loan companies need to charge such high interest rates because their market is high-risk borrowers who are much more likely to default on their loans. While this argument would make sense, the reality is that title loan interest rates aren’t just high, they’re what the New Mexico Supreme Court referred to as unconscionably high. Charging a high interest rate to a borrower with a bad credit rating is one thing. Charging what comes out to an APR of 300 percent or more is highway robbery. And the loans are structured in a way that makes it almost impossible for borrowers to actually pay back their loans on time, so they rack up more and more interest. Most financial institutions look at loans as investments. They’re investing money into a borrower that they feel will be able to pay the loan back, at which point they’ll make money on the interest. Title loan companies are also making money on interest, but their ideal scenario is the borrower keeps paying just enough to keep the loan going without actually paying it back.
It's also difficult to accept the argument that title loan companies are taking on a high amount of risk with the borrowers they loan money to, considering they have built-in protection in the form of the cars that are collateral on their loans. All they need to do is repossess a car and they can recoup what they lost on the loan and much more.
Title loans are a dicey proposition in any state, and you’re better off avoiding them entirely, but that’s especially true in New Mexico. If you do need to borrow a title loan, make sure you have a game plan for paying it back by the due date, because otherwise you’ll end up trapped in a brutal debt cycle.