Utah Title Loan Laws
There are a few federal title loan regulations that apply across the board for all title loan companies in the United States. But most title loan legislation occurs at the state level, which means you can encounter very different title loan laws from one state to another. Utah title loan laws are on the lax side compared to other states, without many restrictions in place to keep title loan companies in check. If you’re thinking about applying for a title loan in Utah or you just want to know more about how they work in the state, here are its rules and regulations.
The Title Loan Process in Utah
It’s not difficult to obtain a title loan in Utah or any other state, as long as you have a car. Since a title loan is a secured loan, it requires a form of collateral, which in this case is your car. This means that the current market value of your car is how the title loan company decides whether or not to approve you for the loan and how much they’re willing to lend you. There is no credit check required to get a title loan, which is one of the reasons why so many people go with title loans – they have bad credit scores or no credit at all but they need quick cash and they don’t have any other options. The speed of the title loan process also draws in customers.
Here’s how the general process of obtaining a title loan would go with any title loan company in Utah:
- Go to the office of the title loan company, making sure to bring your government-issued ID, car title and car with you.
- Complete the title loan paperwork and provide any information the title loan company needs.
- Allow the title loan company to inspect your car.
- Give your car title to the title loan company.
- Receive your loan.
That process is as simple and quick as it sounds, and quite a few title loan companies advertise that they’re able to get people in and out of their office in 30 minutes or less.
One thing you’ll also notice on the websites of many title loan companies is an online title loan application. These usually require your contact information, including your full name, phone number and email address, and details about the car you plan to use as collateral on the loan, including its year, make, model and approximate mileage. In some cases, the title loan company may state that completing the application allows you to get pre approved for a title loan.
In reality, filling out an online title loan application form isn’t worth your time. When you actually visit the office of the title loan company, you’re going to need to fill out the same paperwork that you would have anyway, so you won’t be saving yourself any time when you get there. It’s not like the application process takes long, anyway. All you’ll be doing is providing your information to the title loan company, which means one of its representatives is going to call you up and try to get you to come in and obtain a title loan. If you already need a title loan, this attempt at convincing you to get one isn’t necessary. If you don’t need a title loan, it’s going to be an annoyance.
As far as the documents you need to get a title loan are concerned, federal law prohibits title loan companies from issuing loans to anyone under 18 years of age, which is why they must check your ID to verify your age. You provide your car title to the title loan company for the term of your loan, and then get it back when you’ve repaid your loan. Some title loan companies may also require a set of spare keys to your car. Title loan rules in Utah don’t prohibit them from requiring this, although in some other states it’s not allowed.
Income Requirements for a Title Loan in Utah
The Title Lending Registration Act, which is part of HB0189, governs title loans in Utah, and one section in it requires title loan companies to consider the ability of the borrower to repay their title loan. When you get a title loan, the title loan company is supposed to look at your current and expected income, your current debts and payment obligations, and your employment status. If the title loan company doesn’t do so, they’re in violation of Utah title loan laws.
The title loan company needs to get a signed acknowledgement from the borrower stating that the borrower provided accurate information about their income, obligations and employment, and that they can repay the loan. However, the title loan company doesn’t need to actually obtain any sort of proof of income from the borrower, such as a paystub or bank statement. This, combined with the fact that it’s sometimes difficult to determine if a borrower will or will not be to realistically repay a loan, means that this regulation doesn’t have much of an effect on the title loan process in Utah.
Maximum Title Loan Amounts in Utah
Since the Title Lending Registration Act doesn’t have anything in it regarding the maximum amount for a title loan, this makes Utah one of the many states that doesn’t limit how much title loan companies can lend to borrowers. On the bright side, this allows you to borrow as much as you need through a title loan, provided your car has enough value. The drawback to this is that taking out a larger loan also means you pay much more in interest, so borrowers can easily get into trouble by taking out loans larger than they can handle.
As far as how the title loan company decides how much it is willing to lend you, when you go there they plug your car’s information into a vehicle value guide, such as Kelly Blue Book. They then evaluate your car’s condition during a brief vehicle inspection, and see which condition category it falls under to come up with a precise value. Utah title loan laws prohibit title loan companies from lending you more than the fair market value of car, but this is not an issue, anyway. No title loan company is going to give you anything near your car’s value for a title loan, because they want to be able to make back their loan amount and any interest charges if they need to repossess and sell your car. To play it safe, most title loan companies will lend you up to 30 or 40 percent of your car’s current market value.
Many other states have title loan amount caps set at 2,500 dollars, 5,000 dollars, 25,000 dollars or another limit. For the most part, amount caps don’t make much of a difference when it comes to the vast majority of borrowers, who only need loans for an amount in the hundreds or a couple thousand dollars. People who own cars valuable enough to get a title loan for 25,000 dollars or more rarely end up in a position where they need a title loan.
Title Loan Interest Rates in Utah
Unfortunately for borrowers, title loan laws in Utah do not put any sort of cap on the amount of interest that a title loan company can charge. Utah is far from the only state with no interest cap on title loans, and even when states do have interest caps, they’re still typically extremely high.
So, with Utah title loan laws not reining in title loan companies at all regarding interest rates, how much can you expect to pay? It’s common for a title loan company to charge an interest rate of 25 percent per month, which comes out to an annual percentage yield (APR) or 300 percent. Considering financial institutions that lend to high-risk borrowers typically set their high APRs at 36 percent, the amount that title loan companies charge for interest is unbelievable.
What this means is that if you borrow a title loan for 2,000 dollars, you’re likely going to end up paying 500 dollars per month in interest alone. This is why it’s wise to borrow as little as you can through a title loan, although the best thing to do is avoid them altogether.
Title Loan Terms in Utah
HB0189 and the Title Lending Registration Act don’t specify any sort of term limit for title loans in Utah. While this means title loan companies and their borrowers have the freedom to set up terms that are as short or long as they want, the reality is that title loan companies almost always set up terms that are 30 days in length. This is true both in Utah and most other states across the nation, except for those that set longer minimum term lengths.
The problem with a term length of 30 days is that it gives you very little time to improve your financial situation so you’re able to pay back your title loan. Let’s say that you are dealing with a financial hardship and you need to take out a title loan for 2,000 dollars. Is it realistic to think that you’ll be able to come up with 2,500 dollars by the end of the month? A small portion of borrowers may be able to, but for most this will be extremely difficult, if not impossible.
This is why title loan companies also give you the option to renew your loan. Renewing a title loan is also known as extending it or rolling it over. When you do this, you pay the title loan company only the interest on the loan and not the loan principal. That loan principal then carries over into a new term of 30 days, and that term results in another monthly interest charge.
Because of this setup, title loans are essentially designed for you to fail, so you keep paying the title loan company every month without ever reducing your actual loan principal at all. Title loan companies realize how unlikely it is that borrowers will be able to payback their loans in full at the end of a 30-day term, but they also know that it’s far more likely borrowers will have enough extra cash to cover their interest. It’s easier to get 500 dollars than 2,500 dollars, after all. With no other option, you pay what you can and the loan restarts for another month. The average number of renewals on a title loan is eight, which would result in 4,000 dollars in interest on that aforementioned 2,000-dollar loan.
Defaulting on a Title Loan in Utah
Title loan rules in Utah dictate that if you fail to fulfill the terms of your title loan contract, then you’ve defaulted on the title loan. The most common way to do this is by not making your payment. However, your contract may have other conditions that can also result in a default, which is why it’s important to read the contract carefully. For example, the contract may require you to maintain insurance on the car that is collateral on the loan, and if you don’t do so, you’ve defaulted. While it’s important to follow every condition laid out in a title loan contract, the odds of a title loan company repossessing your car for any reason other than nonpayment are low.
Vehicle Repossession Laws in Utah
When it comes to Utah title loan repossession laws, the state doesn’t provide borrowers with any protection other than the most basic. While many states require the title loan company to provide you with written notice and possibly even a grace period to make your payment before repossessing your car, vehicle repossession laws in Utah don’t require any of this. The title loan company doesn’t need to notify you about the impending repossession of your car, and it doesn’t need to give you any time to catch up on your payment. Once you’ve defaulted, the title loan company can send in the repo man to take your car.
Utah title loan repossession laws stipulate that the repo man cannot breach the peace to repossess your vehicle, which is a basic protection found in every state. What breaching the peace means is open to interpretation. Some actions are obviously prohibited – a repo man can’t assault you, trespass on your enclosed property or threaten you to repossess your car. There is a substantial grey area, though. For example, the law typically allows repo men to go onto a borrower’s property to repossess a car if it’s clearly visible, such as being parked on a driveway. Repo men also often use tricks to gain possession of borrowers’ vehicles, which is also often allowed.
Selling a Repossessed Car
Nowhere in HB0189 does it say anything about the title loan company waiting for a specific period of time after repossession to sell the car. This means that as soon as the title loan company has taken possession of your car, they can sell it to recoup their losses. In many other states, the title loan company needs to provide borrowers with a right to cure, which is a specific amount of time to catch up on payments and get their car back. You’ll have no such luck in Utah, although whether you’re given this opportunity will depend on your title loan company.
About the only protection title loan laws in Utah do offer is in regards to post-sale surpluses and deficiencies. After a title loan company has repossessed and sold your car, it can’t seek any other remedies or come after you for more money, even if the proceeds of the sale didn’t cover the amount owed on the title loan. Laws on this vary drastically from state to state, but there are many states where a title loan company would be able to bill you for any amount that the sale of your car didn’t cover. This certainly would add insult to injury – you pay huge interest charges for months only to have your car repossessed and sold, and then the title loan company sends you a bill for more money. Fortunately, this can’t happen in Utah.
Utah title loan laws also require that the title loan company send you any additional money from the sale of your car if there is a surplus from the sale proceeds compared to what you owed. This may seem like something that should happen no matter what, but not every state requires the title loan company to return surplus amounts to borrowers. In some states, borrowers only get a percentage of the surplus, while in others they don’t get any. That means that a title loan company could sell a car for 5,000 dollars to cover a 1,000-dollar title loan, and then pocket the 4,000-dollar difference. In Utah, the title loan company can’t do this.
How Utah Compares to Other States for Title Loans
In terms of borrower protections on its title loans, Utah ranks near the bottom, although it shares that position with quite a few other states. It’s not the worst, as it at least provides some minor protections, but it’s also far from the best.
The primary issue is the lack of restrictions lawmakers have put on the title loan industry in Utah. Each title loan company has the flexibility to charge what they want, and these companies certainly take advantage.
In all fairness, title loans are a bad deal for borrowers in almost, if not every state. They always have very high interest rates and usually have short terms, so it’s easy for borrowers to end up stuck in a terrible debt cycle. That’s the way they’re set up, and title loan companies prey on high-risk borrowers who have nowhere else to turn. If a borrower has bad credit or doesn’t have any credit, they’re probably not going to be able to get a loan through a traditional financial institution, which makes a title loan company the only option.
Those who support title loan companies claim that because they are issuing loans to high-risk borrowers, they need to charge more to protect themselves and make a profit. This is a weak argument, because it’s not like title loan companies are just charging higher interest. They’re charging significantly higher interest than other types of loans, and setting up loans in a way that maximizes the odds borrowers won’t be able to repay in time. And the idea that title loan companies need to protect themselves also doesn’t hold water. Yes, high-risk borrowers are far more likely to default on their loans. But it’s not like title loan companies have no recourse when this happens. They have your car title, they often have a set of spare keys and they have the legal authority to repossess your car. Since the car is collateral on the title loan, the title loan company has built-in protection if you don’t pay.
While some Utah lawmakers have attempted to rein in the title loan industry, it’s a difficult process, which is also true nationwide. The title loan industry is powerful politically, making many significant campaign contributions. Putting any sort of limits on title loans requires going over quite a few hurdles.
If you are in need of a title loan, you aren’t going to get a good deal anywhere, and getting one in Utah will leave you without much in the way of protection. Try to avoid them if you can, or borrow as little as possible and pay it off by the end of the term.