Title Loans in Alabama: Everything You Need to Know
Having financial difficulties that need to be addressed instantly can cause worry for residents of Alabama.
However, we have the best solution for you: TITLE LOAN.
Read more to know everything before applying!
What Is a Title Loan?
Title loans, often known as car title loans, are generally short-term loans. Usually, it lasts 15 or 30 days.
Your car, truck, motorcycle, or other motor vehicle is used as collateral for the loans. They are often for sums between 25% and 50% of the car's value as the minimum loan amount.
You must offer the title pawn lenders the title to your motor vehicle to obtain a car title loan.
You give the lender the title to your car in exchange for the cash, and they keep it until it is fully repaid.
The lender will require the motor vehicle, a photo ID, your zip code, a driver's license, and insurance documentation. Numerous lenders also need a spare set of car keys.
Because a title loan typically doesn't involve a credit check, the application process can be completed in as little as 15 to 45 minutes, and you can keep driving your car.
NOTE: Be cautious because a title loan can get borrowers into difficulty.
So, How Does It Work in Alabama?
A potential borrower brings the motor vehicle and vehicle title to the lender.
The lenders determine the value of the vehicle and make a loan offer based on a portion of that sum.
According to a Pew Charitable Trusts report, the minimum amount is $1,000.
The minimum amount you can borrow when applying for a title loan depends on the vehicle evaluation by the title pawn.
The newer the model, the higher the appraisal you can get!
The borrower can drive away with the cash in less than an hour, but the title pawns keep the vehicle title as security until the borrowed money is paid back.
Alabama Title Loan Laws
The Pawn Shop Act governs title loans in Alabama.
The motor vehicle legally becomes the title lender's property if a title lender does not collect payment on a title loan after 30 days have passed since the initial contract was signed.
The maximum interest charged by the title lender each month is 25 percent of the amount borrowed.
Since most agencies in Alabama are for less than $1,000, many low-income borrowers cannot repay the debt and lose their motor vehicle.
Different Types of Alabama Title Loans
There are two categories of car title loans that exist in Alabama:
Single-payment loans have an average APR of 300 percent and call for borrowers to return in one big sum, typically after 30 days.
These Payday loans (also known as single-payment loans) are simple to get, but you must repay the entire loan amount (NOTE: Expect high-interest rates on the date the loan matures.).
If you don't do that, you'll have to borrow again, which could be expensive.
Below are the benefits of getting a single-payment car title loan:
- Single-payment loans are excellent for bridging the gap in your regular spending.
- This is a fantastic choice if you require money right now and are confident in your ability to repay the loan in full when the time comes.
- They provide straightforward pricing, so the whole payback is always known upfront.
- Single-payment loans have set maturity dates, so you won't accrue additional fees over time.
Single payment also has its own disadvantages, and these are:
- They usually have an APR that is greater than installment loans.
- Borrowers' options are limited if unanticipated costs materialize.
- You will need to borrow again if you are unable to pay your debt off in full on the due date, which will end up costing you considerably more than you had anticipated
2) Installment Loans
These loans have an average APR of 259 percent, allowing borrowers to make numerous payments, typically spaced out over three to six months.
Installment loans are repaid over time while carrying interest.
The applicant's credit score, the amount, and the applicant's history are just a few examples of the variables that can affect the interest rate.
An installment loan might be gone for several years.
Some people are suspiscious of installment goods because it could seem like you're merely extending the length of your debt.
Nevertheless, taking out this kind of loan has a few benefits.
The Pros of Installment Loans:
Listed below are the benefits of having an installment loan:
- The monthly payments amount will be more reasonable if the payback is divided into installments.
- By making additional payments or paying off early, the cost of the loan might be decreased.
- The payments you make contribute to the development of your credit history and credit score.
The CoNS of Installment Loans:
- May cost more overall than a single pay product.
- If you pay off the loan early, they might levy a fee.
Factors to Consider Before Applying for Alabama Title Loans
The factors listed below should be considered and discussed when planning to apply for a motor vehicle loan.
This helps you to assess whether you want to apply or find alternatives.
You must have a vehicle title that has your name as an owner. Having the motor vehicle at lien may reverse the lending decision of the lenders.
NOTE: If your car is not fully paid for, you can instantly be rejected by lenders.
If you are wondering how much cash you can get, the answer is it depends on your motor vehicle.
- If you have the LATEST model, your loan proceeds are as high as the MAXIMUM loan amount.
- If you have an OLDER motor vehicle, you might face challenges in dealing with your financial difficulties.
As these are protected by federal law, you must be aware of the minimum rate.
However, some predatory title pawns lenders exceed this rate, and in most cases, it offers your desired and needed amount.
With that, you must evaluate if the interest rate is reasonable and assess if you have the ability to repay the borrowed amount.
The last factor you have to consider before applying is the repayment schedule. Some title pawns have due dates that may not fit your salary schedule.
With that, you need to find a lender that has a flexible schedule term to avoid having difficulties and additional payments.
Step-By-Step Procedure for Title Loan Application Process in Alabama
A title loan has its fair share of benefits and drawbacks, as listed above. If it is FAVORABLE on your end, you can immediately submit an application!
Listed below are the detailed procedures for applying for the Alabama title.
1) Find a Lender
The first thing you have to consider is the lender!
Look for a lender that is licensed to operate pawn transactions. This safeguards your vehicle title, motor vehicle, and, the cash you borrowed.
CAUTION: A title loan is legal in Alabama, but not all agencies are licensed!
2) Compare Lender Terms
Comparing the terms allows you to manually compute how much cash you can get for your pawn loans.
The lender's interest rate and schedule are things you have to compare when applying for.
You can also look for their loan agreement about motor vehicle title loans.
3) Apply Online
After comparing the lender's term, you can instantly apply with the lender you chose!
You may apply online as these lending agencies have a website that brings ease and convenience to their customers.
However, after submitting your application, remember that loan approval is subject to lending decisions!
Your loan proceeds as having the chance of being accepted or rejected.
Just be sure to include the exact telephone number or cell number so the store associate can contact you on your cell phone.
Also, include your home address along with your zip code as additional information so the agent can visit your home to check your eligibility.
NOTE: Loan approval may depend if the agency needs good credit history!
4) Get Prequalified
After submitting your loan application, you must wait for the store associate to contact you. However, you may want to prepare ahead the eligible documents for a vehicle loan.
CAUTION: Most lenders approved the loan application process of the customers!
5) Submit Loan Documents
When you contact the store associate regarding your loan application, your lender may visit your residential address to check the documents.
The necessary loan documents are:
- Car Title: Your vehicle title is the most important document you must prepare when applying for a car title loan. The loan agent will check if the car is not a lien. Owning a motor vehicle is a major PLUS for lending agencies.
- Functional Vehicle: Along with a vehicle title, a functional motor vehicle is also needed when applying. The agent will check if the vehicle doesn't have minor and major issues that need to be repaired. Also, the agent may check if the car is registered in Alabama.
- Government-issued ID: To prove your identity, a government-issued ID is MUST for every lending agency. (NOTE: Also, the borrower must of legal age.)
- Proof of Income: To prove that you can repay the loan you applied for, the loan agent will also look for documents as proof of income. This income documentation may come in the form of payslips, utility bills (electric and water bills), or anything as long as it reflects a payment history.
- Proof of Residency: Alabama agencies require proof of residency to ensure that you are a resident of a state as it contains your zip code. This safeguards the loan amount they let the customer borrow along with the vehicle title.
The Pros of Applying for Title Loans
A title loan has numerous benefits, listed below:
1) Fast Cash
The ability to receive money immediately is the main advantage of an auto title loan.
In most cases, you only need to fill out an application, render the vehicle title and receive your cash!
Typically, the loan is significantly smaller than the car's value, which helps the lender if the borrower cannot repay the loan.
2) Minimal Credit Checks
Because they are so much simpler to obtain because they only need a vehicle title, auto title loans are frequently used.
Most lenders run credit checks on the applicant to see if they are subject to a loan.
Numerous auto title lenders don't verify your credit and accept those with bad credit.
3) Keep the Vehicle
You are permitted to use your property while it is being used as collateral, much like home equity.
You can use your motor vehicle as collateral and keep the car if you make your payments.
4) Simple to Qualify
It is simple to be approved. Other prerequisites for title loans include possessing a clean title to your car, consistent monthly income, and a state-issued identity.
5) Online Application
Yes, you can submit an online application for a title loan.
Hundreds of national internet lenders offer this helpful service.
In many cases, you can complete the loan application procedure without visiting a physical location.
You can manage your title loan requirements via your computer or mobile device.
The Cons of Applying for Title Loans
However, when a title is not used appropriately, it could lead to the different drawbacks listed below:
1) Additional Fee and Late Payment Interest
Late payments may incur additional costs and interest.
When you miss payments, your loan's balance goes up. As a result, you might find it harder to repay the loan.
2) Title Loans Are Expensive
Title loans are expensive; they often have interest rates with annual percentage rates (APR) of up to 300 percent.
That translates to interest fees of, on average, 25% every month.
For instance, if you borrow $1,000 and pay a monthly interest of 25%, you would need to pay back $1,250 after 30 days.
Additionally, that amount doesn't account for any other expenses you'll likely have to pay.
These short-term loans are therefore costly, but the issue only grows worse.
3) Result to Cycle OF Debt
The lender may offer to renew or roll over the loan into a new loan if you cannot repay the entire loan at the end of the loan term.
You will be charged additional fees and interest due to this new loan.
Say you took out a $1,000 loan with a 25% fee but could only return $250 rather than the whole $1,250 after 30 days.
If your lender offers you a rollover loan, the $1,000 you still owe would be rolled into a new loan with higher interest and costs.
4) Your Vehicle Could Be Seized
You run the risk of losing your car if you cannot repay the total amount of the loan when it's due.
According to a Consumer Finance Protection Bureau survey, one in five title loans for borrowers who have to roll them over results in the automobile being repossessed.
NOTE: Even if you've been making partial payments, the lender has the right to seize your car if you can't keep up with payments as specified in your loan agreement.
Applying for a loan when new to these services may be confusing.
However, this article will help you as it has all the answers to your questions!
What Makes a Title Loan Convenient?
The best feature that makes it convenient is it doesn't run a credit check!
Make sure you have a clear vehicle title that is not on lien and a functional motor vehicle to get approved IMMEDIATELY.
How Much Cash Can I Get?
The max loan amount depends on your motor vehicle appraisal!
Title pawn agency will check the details of your vehicle and let you borrow cash that fits its value!
If you are questioning "How Much Cash Can I Get With A 10-Year Old Motor Vehicle?" the best and direct answer for this is a low amount of cash.
Can I Get Help With Credit Services Organizations?
Credit Services Organizations (CSO) help those with credit difficulties apply for a loan with a favorable loan agreement.
It also provides credit counseling for borrowers struggling with their new loans.
Are Payday Loans and Title Loans the Same?
NO! Payday and title loans are not the same.
A payday loan may or may not need a good credit history. The borrower just needs to have an auto-debit card or auto-debit bank account.
As for title loans, it needs your vehicle title and functional motor vehicle.
Is the Title Loan Process Hard to Accomplish?
Title loans are the easiest loan to get an account approval. It just needs your vehicle title, working and functional motor vehicle.
Do Title Loans Lend Money Directly?
YES! After your account approval, you can instantly render the vehicle title, and as an exchange, you can get your borrowed money. You can opt to transfer it to your bank account.
This is the EASIEST way to address your financial needs!
Is There a Credit Limit?
Your credit score does not determine if you are qualified for a loan. Your motor vehicle and vehicle title are enough to fix your financial needs.
Your motor vehicle and vehicle title can be used when facing financial adversity. You can use it for medical costs, utility bills, and even for funeral and household purposes.
Lending agencies may have competitive rates for their loan products, so you must be careful which agency you should apply for.
Also, remember that paying partial payment can ensure that your motor vehicle and the vehicle title are subject to repossession.