Title Loans refer to the issuing of loans that require an asset as collateral. The asset can vary from a piece of land to an automobile or anything else. The most common type of title loan generally approved in the U.S. is the car title loan, wherein the car may be used as collateral for a certain sum of money. The exact origin of title loans is unknown, but they’ve been around for some time. In early times people used their land and pets as collateral for loans and a vehicle equity loan functions under much the same principle.
The process of getting approved for a title loan varies from state to state, but the central idea is the same. Here is a brief process of how a title loan works with a registered loan lender:
- The borrower contacts the company and uses a car as collateral for a loan.
- The lending company checks the asset and estimates a price.
- The company then lends up to 25% of the asset price for a specific time.
- If the money is not returned within the period, then the vehicle can be kept by the company.
The legality of title loans in what’s known as The Natural State is rather cut and dry. The Arkansas Short Term Loan Act prohibits the use of your vehicle’s pink slip as an asset for collateral in Arkansas. Thus, a typical car title loan is banned in the state of Arkansas. However, land and jewelry can be used as collateral for title loans in the state of Arkansas. We know there are still many pawn shops throughout the city. Little Rock has dozens of small pawn shops and many of these locations will let you pawn your property as collateral for a loan. But as of today, you can’t pawn your car for a title loan.
Alternatives for title loans:
Since vehicle title loans are illegal in the state of Arkansas, the following are a few alternatives that can be used if someone is in dire need of money-
- Land Title Loan – Issues a piece of land as collateral for a certain time.
- Gold or Jewelry Title Loan – Collateral used can be gold or any piece of jewelry.
- Boat Title Loan – Boats can also be used as collateral for title loans in the state of Arkansas.
- Pawnshops – Pawnshops are useful for small loan amounts.
Basic regulations regarding title loans:
Car Title loans offered throughout most states in the Southeast are governed by federal laws as well as state laws. The federal laws allow cars, land, jewelry and other items as collateral. The state of Arkansas also has laws regulating title loans. These laws assist in better governance of the state. Following are the laws regarding title loans in Arkansas:
- Car Title loans are illegal in Arkansas.
- Proof of Residency – Any official document that serves the purpose of identifying the address of the borrower must be presented.
- Proof of Income – Income doesn’t need to be from a job, this is only to ascertain that the loan can be paid off.
- For Land Title loans, interest can’t exceed 25%.
- In the case of pawning, the item cannot be stored for more than 2 months.
Although car title loans are illegal in Arkansas, there are several other ways of acquiring cash to pay for an emergency expense. Beware of illegal companies offering car title loans in Arkansas and other states where they’re against the law. This includes online companies that operate offshore. Many of these services will say they can legally provide funds in AR. But in reality they are not registered or regulated by the State.