South Carolina Title Loan Laws
South Carolina is one of only about thirteen states that explicitly allows short-term title loans. There are some other states that use a loophole to offer these types of loans. Many states across the US have banned the use of short-term title loans noting unhealthy practices of targeting low-income individuals.
All the title loan rules in SC can be found online at the South Carolina Legislature website. You want to ensure you are completely knowledgeable about the entire loan process and the South Carolina title loan laws. These laws outline the South Carolina consumer protection code as well.
A title loan, also referred to as a car or auto title loan, is a short-term secured loan where a borrower uses their vehicle as collateral. This means that if the borrower were to default on the loan the lender has the right to seize the vehicle used as collateral for repayment of the loan.
What Is The Term Length?
It’s important to really understand how the length of these loans work, as it could mean the difference in paying hundreds to paying thousands in interest. Title loans are typically set up for a term of one month (30 days).
This term length can vary depending on the lender but is required to be a minimum of one month per the short-term vehicle title loan laws in South Carolina (Section 37-3-413). The maximum initial term allowed for this type of loan is 120 days.
Renewal Term Length Options
There are many different regulations about the length of a loan set by the section mentioned above. Each title loan typically comes with the option for additional renewal terms. Let’s take a look at an example to help you better understand how these renewal terms work.
For example purposes, let’s assume you take out a title loan of $1,000 that has a 30-day initial term. This means you will get $1,000 from the lender with the agreement you will pay them the $1,000 plus interest charges at the end of the 30-day term.
At the end of the 30 days, you find yourself unable to pay the entire $1,000 plus interest to the lender. The lender will typically offer a renewal period for another 30 days. This requires you to pay the interest that accrued on the loan for the first 30 days. Then the loan is renewed for an additional term.
At the end of this additional term, you are expected to pay the $1,000 principal and the interest that accrued for the second month. If you can’t pay the principal, you are again offered to pay the interest that accrued and renewal your loan.
In South Carolina, a lender may only offer the borrower up to six additional renewal periods on their loan. All the renewal periods must be the exact same length as the initial term. The combined terms of the six renewal periods may not exceed 240 days.
Interest Charges On Renewals
If you find yourself unable to pay the total amount owed on the loan, meaning the combined total of the interest accrued and the principal amount, the lender can offer a renewal term. The amount of interest accrued during the first term cannot be combined with the total loan amount for the second term.
This essentially means that you must pay the accrued interest amount for the first part of the loan. The renewal term loan can only be for the principal amount plus any lien recording fees.
Interest Rate On Renewals
According to the title loan laws in South Carolina, the interest rate must not deviate from the initial rate agreed upon for the initial term. This means that every additional renewal term you agree to, the interest rate will be the exact same as it was for the first term.
What Happens At The End Of The Sixth Renewal Term
If you choose to continue to renew your title loan for the maximum amount set by the South Carolina title loan laws, you would be at a total of six renewal periods. At the end of the last renewal term, which would be the sixth renewal term, interest stops accumulating on the loan.
The borrower must repay the remaining principal amount of the loan. This is allowed to be repaid in six monthly installments. During these six monthly payments for the principal balance, the lender may not charge any interest fees.
How Much Money Can A Title Loan Be For?
Lenders are required to offer the borrower a principal loan amount that is equal to or less than the fair market retail value of the vehicle. The lender must use common industry appraisal guides, such as Kelly Blue Book. In no case may a lender offer more than the fair market value of the car as the loan principal amount.
In South Carolina, many lenders will restrict their loans to being over $600. This is due to the fact that the South Carolina maximum interest rate laws apply to loan amounts below $600. The average loan ranges from $601 to $2,500.
What Are The Lender’s Responsibilities For The Loan?
The lender is to follow all South Carolina title loan laws associated with the lending practices of short-term secured vehicle loans. Initially the lender must assess the fair market value of the car based off of the industry appraisal guides. They may offer up to that amount for the loan.
Maximum Interest Rate
The lender is responsible for posting the South Carolina maximum interest rate on their loans in a highly conspicuous place for the borrower to see. The lender may not advertise lower interest rates and then change the interest rate for the renewal periods.
Good Faith Judgment
During the loan preparation process, the lender must act in good faith to believe the borrower has the ability to repay the loan according to the title loan rules in South Carolina ( SC code 37-5-108 ). The lender is required to verify a borrower’s employment, monthly income, and know about other monthly expenses.
In addition, the lender should obtain a signed statement from the borrower that is separate from the loan agreement. This signed statement is outlined by the title loan rules in South Carolina to specify that the information regarding employment, income, and expenses supplied by the borrower is correct and they believe they have the ability to repay the loan.
Lack of a good faith judgment can be ruled as an unconscionable dealing, which could forfeit the lender’s right to receive their funds or seize collateral. SC code 37-5-108 outlines the considerations of an unconscionable dealing.
Higher Interest Rate Notice
All short-term vehicle secured loan lenders are required to have the following stated on the loan agreement:
‘THIS IS A HIGHER INTEREST LOAN. YOU SHOULD GO TO ANOTHER SOURCE IF YOU HAVE THE ABILITY TO BORROW AT A LOWER RATE OF INTEREST. YOU ARE PLACING YOUR VEHICLE AT RISK IF YOU DEFAULT ON THIS LOAN.’
This is required to be in a highly conspicuous place above the borrower’s signature and must be printed in at least 14 point font size.
Right Of Rescission
Due to the intensity that can ensue during times of financial difficulties, the South Carolina government has allowed for a one-day void policy on all short-term secured vehicle loans. The borrower has from the time the loan agreement was signed until the end of the next business day to void out the agreement.
If the borrower decides to void out the agreement they must return the principal loan amount to the lender. There shall be no interest charged on the money as long as it is returned to the lender by the end of the next business day after the agreement was executed.
Defaulting On A Title Loan
If the borrower defaults on their loan payment the lender may seek possession of the vehicle to secure the loan after following the right to cure notice.
The Right To Cure Notice
According to the title loan repossession laws in SC, a lender must send the borrower a right to cure notice. This should be sent out ten days after a payment is not received on a loan. This notice should be in writing and either hand delivered or sent to the borrower’s home address. The exact wording that must be on the notice is outlined by the South Carolina Consumer Protection Code.
The SC vehicle repossession laws clearly state the lender must wait for 20 days after the notice of the right to cure is given to the customer before taking any further action. The borrower may pay the balance owed during this time period to remedy the situation.
If the borrower doesn’t pay the amount owed in this minimum applicable period, the lender then may seize the collateral outlined in the loan agreement. To seize the collateral, the lender must follow all SC repossession laws outlined by the South Carolina State Government.
Repossessing The Vehicle
In most cases, the lender will have a spare key and/or a global positioning system (GPS) tracker on the vehicle. This will allow the lender to locate the vehicle for repossession.
This repossession can be done without a judicial order according to title loan laws in SC as long as the lender follows a few requirements. These include not entering a dwelling, no use of force, and no other breach of peace during the time of the repossession. All of these are outlined in the SC title loan repo laws.
In many cases, the borrower will peacefully overturn the vehicle to the lender. A lender may enter a borrower’s dwelling to seize the collateral as long as the borrower consents as stated in the title loan regulations in SC.
