Title Loan Interest Rates

Whether you're getting title loans Miami or you're in another area and getting a title loan, it's crucial that you understand how the interest on the loan will work. Every title loan company needs to abide by the laws in their state, and since title loan regulations are so different from state to state, the interest rate on your loan could vary quite a bit depending on where you get it. Here's everything you need to know regarding car title loan interest rates.

The Types of Title Loan Interest Rate Limits

For the states that have title loan interest rate limits, the limit may be expressed as a monthly limit or an annual percentage rate (APR). To convert a monthly interest rate limit to an APR, you can simply multiple it by 12. To convert an APR to a monthly interest rate limit, divide by 12. Here's an example to find the APR of a title loan in Alabama:

  1. Look up the interest rate limit for title loans in Alabama, which you'll find is 25 percent per month.
  2. Multiply that by 12 to get the maximum title loan APR in Alabama of 300 percent.

When it comes to how these limits work, you'll find that every state falls into one of four categories. Those are broken down below.

No Limit

This is exactly what it sounds like. The state has chosen not to limit how much title loan companies can charge in interest, which mean the decision is entirely up to the lender. Delaware, Idaho and Illinois are a few of the many states that are like this.

One Set Limit

Another type of limit that's simple to understand is one set limit. This is when the state just has one flat limit that applies to all title loans, all the time. We've already gone over one example of this with Alabama and its 25 percent monthly interest rate limit. Mississippi is another state with one set limit, and it also happens to have a monthly limit of 25 percent. Many states go with one set limit to keep things simple.

Limits by Amount Borrowed

Here's where it gets a bit more complex, and if you're planning to visit any Florida title loan locations, then you'll need to understand this system, because it's what Florida uses. With this type of interest rate limit, the limit depends on the amount of your title loan. Let's start by using Florida as an example to show how this works:

  • If you get a Florida title loan for an amount under $2,000, the most the lender can charge you is a 30-percent APR.
  • If you get a Florida title loan for an amount between $2,000 and $3,000, the most the lender can charge you is a 24-percent APR.
  • If you get a Florida title loan for an amount over $3,000, the most the lender can charge you is an 18-percent APR.

You may have noticed that this is a much lower APR than any of the other states listed so far, and that's because Florida is one of the best states when it comes to protecting borrowers of title loans. Arizona and Virginia are the other states that operate under this type of interest rate system on their title loans, although they allow higher limits than Florida does.

Limits by the Length of the Title Loan

This is another one of the more complex interest rate systems, and it's also the rarest. The limit is based on how long you've had the title loan. The two states that operate this way are Georgia and Tennessee. They each work a bit differently, and we'll break down them both.

In Georgia, the interest rate limit is 25 percent per month for the first three months that you have the title loan (this is obviously assuming you extend the loan). After that, the limit on all subsequent months is just 12.5 percent, meaning you don't need to pay as much interest when you've had the loan longer.

In Tennessee, the limit is 22 percent divided by the number of months that you've had the title loan. Again, you'll pay less the longer the loan goes on, although this still doesn't make it a good idea to keep a title loan for too long. You should only extend one of you're trying to prevent a default.

More than Just Interest

Keep in mind that in certain states, there are more charges allowed on a title loan than just interest. A few states allow fees, which means that even if there's a certain interest rate limit in that state, the lender can still charge more than that by classifying some of it as fees instead of just interest. No matter where you get your title loan, you'll be able to see a full breakdown of the interest rate and any fees on your car title loan contract.

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