What should I know about title loans?
Title loan laws in Georgia
- What is a title loan?
- What are my rights and responsibilities?
- What the pawnbroker's rights and responsibilities?
What is a title loan?
A title loan is when you give your car title to a pawnbroker as collateral for a loan. If you fail to pay back the loan and interest in time, the pawnbroker can repossess your car immediately. The length of a title pawn loan is 30 days. The loan can be extended in 30-day increments if both you and the pawnbroker agree.
These types of loans are dangerous. They have very high interest rates and can lead to you losing your car. If you borrow $500 and the pawnbroker charges you an interest rate of 25% per month, at the end of the month you will owe $625. If you extend the loan for another 30 days, at the end of the second month, you will owe $750. Extend for a third month and you will owe $875. The majority of people who take out title loans cannot repay the loan in the first month. In fact, the average person will extend the loan eight times.
One in five people who take out title loans will have their car repossessed. If you cannot pay, the pawnbroker owns your car. If they sell it for more than you owe, the pawnbroker gets to keep that extra money.
What are my rights and responsibilities?
Although it is not recommended, if you own your car, you have the right to pawn your car title. If you do, you are responsible for paying back the loan, plus interest, within the 30 days.
If you fail to pay back or extend the loan, the pawnbroker can immediately repossess your car. If the car is repossessed, you will have 30 days to get your car back. To do that, you must pay:
The loan amount, plus interest and fees,
The cost of the repossession (up to $250),
Storage fees ($5/day),
Any other fees for the handling of the car.
If you cannot pay within 30 days after your car is repossessed, the pawnbroker can sell your car and keep all the money, even if it is more than what you owe.
What are the pawnbroker’s rights and responsibilities?
Pawnbrokers may not charge you more than 25% interest each month for the first 3 months. After 3 months, they can charge 12.5% interest per month.
When you pawn your title, the pawnbroker must give you a written statement that says:
“Failure to make your payment as described in this document can result in the loss of your motor vehicle. The pawnbroker can also charge you certain fees if he or she actually repossesses the vehicle.”
If you fail to pay back your loan plus interest and fees, the pawnbroker has the right to repossess the car immediately. So, if your payment is due on Thursday, the pawnbroker can legally take your car on Friday. The pawnbroker has the right to:
Seize your vehicle at any time,
Without notice, and
To come on your property to seize the vehicle. A pawnbroker can take a car out of your driveway, but may not take a car out of your garage.
The pawnbroker can seize the vehicle as long as they do not “breach the peace.” Breaching the peace generally means the pawnbroker cannot trespass, use force, damage other property, or threaten you to repossess your vehicle.
After repossession, the pawnbroker can sell your car and keep any profit.
What can I do if I have a problem with a title loan?
There are not many protections for people who take out title loans. Municipalities are responsible for regulating title loans in Georgia, so if you have an issue with a title pawnbroker or your title loan, you should contact an attorney or go to your local police station.
If you were charged fees that the pawnbroker did not tell you about beforehand, or were more than allowed under the law, you may be able the pawnbroker. But, first, you must notify the pawnbroker in writing and give them 30 days to return the unlawful fees.
Watch for any language in the contract about where you can settle disputes.
Who is protected from title loans?
The only people in Georgia who are protected from the excessive interest rates of most title loans are active duty military. The Military Lending Act caps the annual interest rate at 36% for loans to active duty military, including title loans. For non-military borrowers, the annual interest rate for a title loan is 300% for the first 3 months.
- Read the Georgia Consumer Protection Division’s warnings about Title Pawns and Cash Advances.
- Find out what disclosures a pawnbroker must give on Georgia.gov.