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.
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.
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.
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.