Title loans have become increasingly popular in the South. They provide many benefits to people who want to borrow money for a short time period. The payment is guaranteed, so it advances the loan at a lower rate of interest. The borrower can continue to use the collateral, so it does not affect the borrower’s productivity.
Perhaps half the states in the United States allow title loans; Georgia is one of the few states that do. The reason why pink slip lending was banned in some states is that they consider them to be predatory in nature. Critics argue that the interest rates and processing fees are unreasonable and that the business model of title loans seeks to entrap distressed and naïve individuals. Other states have strict regulations on borrowing and lending through title loans. For example, in Montana, they do not allow the annual percentage rate of interest to go over 36%.
If you’re living in a state where it is not possible to get a title loan, or if it may prove to be counterproductive, these are some alternatives you could consider:
- A short-term bank loan
- Credit card advance
- Peer-to-peer loans
Status of Title Loans in Georgia
In the state of Georgia, title loans have been legal and governed under pawn brokerage laws rather than separate title loan laws. The logic behind this is that title loan transactions are similar to pawn brokering. The borrower hands over the vehicle title to the lender for a short period of time. When the borrower repays the loan, the lender returns the vehicle title. As of 2020 the Georgia Department of Banking and Finance no longer has regulatory control of car title loan providers. Lenders are now regulated by the Georgia Industrial Loan Act.
Title Loan Regulations in Georgia
The law regulates all aspects involved in a title loan, such as a transaction, lenders, borrowers, interest rates and fees.
- The requirements for those who wish to borrow are:
- The borrower must be a legal adult, i.e. of 18 years of age
- The borrower must have legal identification
- The borrower must provide some proof about his/her residence and his/her income
- The borrower must be the direct owner of the vehicle, i.e. he/she must be the legal holder of the title of the vehicle. This means you cannot enable a title loan on leased, rented, financed, and those vehicles that have been bought on loan by the bank.
The lender must be a licensed industrial loan lender. This means they have met the requirements to be a valid lender and certified – thus their practices are monitored and regulated by the state. This way, it protects the borrowers from predatory lenders.
The Georgia code also makes it mandatory that a grace period of 30 days is the period for repayment, in case the borrower has been unable to pay back the loan. The interest rate and lien fee are also regulated by state law.
In any case, you should avoid title loans; If you really have to borrow money, you must study all the laws and regulations about title loans in your country. That is the only way to protect yourself.