Title loan interest rates vary widely, but they're generally quite high.
You can find rates as high as 25% - 36% per month (that's 300% - 432% APR) or as low as 8.08% per month (that's roughly 97% APR) for a title loan — it's all about location. 📍🗺️
Title loans are known for their ease, speed, and... hefty price tag. Depending on where you reside, title loan interest rates can vary quite a bit as their cost hinges on the lender you choose and your state's regulations. Though, you can expect these loans' monthly finance charges to sit no higher than 36% in most states — thanks to state legislation and consumer protect laws put in place in recent years.
Learn: What happens if you don't pay a title loan back?
However, be advised, that not all states have implemented consumer protections or rate caps for these types of loans. If you are a resident of a state that doesn't regulate title loans, understand the end-all cost of your loan before signing and borrow with extreme care.[1]
High interest rates for title loans stem from the risk lenders undertake with these types of loans. Title loans often do not require a credit check, which inherently means more risk for the lender. Since title loan lenders don't evaluate creditworthiness and — in turn — stand a higher chance of not recouping their money, they charge higher rates to cover their potential losses.
Learn: Can you be arrested for not paying a title loan?
Below are a few more factors that can greatly influence title loan interest rates that you should keep in mind:
- Location: Different states have different regulations that can affect interest rates.
- Lender's Policies: Individual lenders' risk assessments and policies can influence the rates charged.
- Loan Terms: The amount of the loan and its duration can also impact the interest rates. Larger, longer-term loans often have higher rates since they’re riskier.
- Credit History: Although less significant for title loans, a borrower's credit history might still have an impact on rates.
- Vehicle Condition and Value: The state and value of the vehicle used as collateral can affect the interest rates. A vehicle in better condition or with higher value typically leads to more favorable rates.
