When you’re seriously strapped for cash, taking out a title loan is one option for covering an emergency, albeit the most dangerous one. Title loans are small loans, usually well under $10,000, and they can end up costing you an arm and a leg – or rather, a wheel and an engine. See, if you don’t pay back your title loan, the lender will repossess and sell your car – and keep the proceeds. And that means all of the proceeds in most states, even if you only owe $500 but your car sells for $5,000. One in six title loan customers lose their vehicle to repossession when they can’t pay off the loan.
And that’s why North Carolina is having none of that title loan nonsense.
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North Carolina Takes a Stand Against Car Title Loans
In 1999, North Carolina passed the toughest predatory lending law in the country, and in 2001, it became the first state in the U.S. to shut down payday lenders and install tough regulations on small dollar loans of less than $10,000. In the years since, the consumer finance industry has lobbied long and hard to get the state to at least lift the annual interest rate cap of 36 percent, which is high by credit card standards but about 264 percent lower than the small dollar loan industry standard.
North Carolina Title Loans in a Nutshell
For those of you who are fortunate enough to have never needed a title loan or made the mistake of taking one out, here’s how they work: You turn over your vehicle’s original title to a lender in exchange for a 30-day cash loan. The monthly interest rate on these loans is usually 25 percent or more, which is equivalent to an annual percentage rate, or APR, of 300 percent. And since the average title loan customer has to roll over the loan each month for eight months before finally paying it off, that’s a whole lot of interest.
How much interest is it? Well, if you take out a $1,000 title loan, you’ll owe $1,250 by the end of the 30-day term. If you roll it over the typical eight times, at the end of the eighth month, when you finally pay it off, you will have paid back a total of $3000. Keep rolling it over for a full year, and that $1,000 will have cost you a total of $4,000.
1%-Legislators Give the Middle Finger to 99%-Plebes
Against overwhelming, bi-partisan opposition to raising interest rates on small dollar loans – a poll by the North Carolina Policy Watch found 84 percent of respondents opposed raising rates, including 82 percent of Republicans and 83 percent of Democrats – a few Republican legislators felt deep, deep empathy for the poor, struggling banks who weren’t allowed to rob citizens blind, and a bill to raise the cap passed the Republican-controlled House by a hair in 2011. Happily, the House Speaker changed his vote a couple of weeks later, and the bill has been lolling about ever since, neither here nor there.
But none of that really matters much anyway when it comes to title loans, because title loans are 100 percent illegal in the state of North Carolina.
Circumventing Legislation is the American Way
But where there’s a will, there’s a way, so for North Carolina residents who are looking to get screwed over by a title loan, a trip over the border is in order. South Carolina allows title loans, and they market their wares heavily in North Carolina. That’s because there’s no law against North Carolina residents obtaining a title loan down south. In many cases, a title loan can even be obtained over the Internet with no need to leave the state. However, according to North Carolina Statute 53-190, contracts for loans of $10,000 or less that are made outside of the state will not be enforced by North Carolina unless every activity regarding the loan – including “solicitation, discussion, negotiation, offer, acceptance, signing of documents, and delivery and receipt of funds” – occurs entirely outside of the state.
Title Loan Alternatives in North Carolina
Predatory lending isn’t good for anyone except those who run the soulless institutions that make an absolute killing off the misfortunes of the less fortunate, and so instead of feeding the monster by stepping outside of the state to secure a title loan, look high and low for other alternatives. Consider asking friends or family members for a small loan, look into small dollar loans offered by credit unions, check with local churches and charities about getting emergency funds, and try to negotiate with debtors or utilities so that taking out a title loan to cover payments won’t be necessary. Title loans are a big can of slimy worms that you’re better off leaving in the can.
If You Decide to Get Car Title Loans in North Carolina. . .
You have to remember that car title loans in North Carolina are designed to target those who need money fast due to immediate financial needs, usually to cope with emergency expenses, or to pay for other more pressing bills.
Applying for a car title loan means you’re using your car as collateral. So if you don’t want to lose your car, make sure that you will be able to repay it fully within the agreed due date. Otherwise, your car may be repossessed by the lender.
If you decide to proceed with the loan, the lender or the lending firm will ask for your proof of insurance and proof of your identification (photo ID). They will also need to check the vehicle you pledge as collateral.
Now, car title loans usually advertise a fast approval process, but oftentimes, hidden charges will be masked in the terms of their offer. So be extra careful when signing the deal. Legal terms may be hard to read, but do read and understand what you are agreeing with. Don’t be afraid to ask if there’s something unclear, or bring someone who understands the legalities with you so you can consult before you sign.
During the duration of the loan term, your lender or the lending firm will get hold of your car title.
Again, if you fail to repay the total loan amount within the agreed deadline, the lender may repossess your collateral. The tricky thing here is that they may allow you to roll over the loan, but this means that you’ll need to pay extra charges as well as interest.
This may be a debt trap, so unless you can guarantee that you can pay the extra charges, plus interest, on time, it’s better not to renew. It’s still up to you in the end, though.