There can be many conditions and regulations that make acquiring loans through traditional methods difficult for some people. Going through the traditional avenues such as banks and credit unions may prove to be challenging for some people. The complicated procedures and high financial requirements are what make title loans an appealing alternative. Title loans may be used for even very small amounts, though the interest rates tend to be very high.
In America, title loans are not legal in every state. There are, however, many states that offer them. Some of these include Alabama, Arizona, Tennessee, Florida, and more. For the states where title loans are illegal, some alternatives include getting a short-term loan from a bank, credit card, cash, peer-to-peer loans, or help from friends and relatives.
If a person is interested in applying for a title loan some of the basic requirements include: proof of ownership of the vehicle, proof of monthly income, a government issued ID, and proof of insurance for loans of $2500 or above.
In Tennessee, the minimum age required for the borrower is 18 years. Furthermore, an act was enabled called the Tennessee Title Pledge Act. Under this act lenders may issue loans for 30-day periods. The act allows for renewal of the terms in 30-day allotments. The maximum interest rate allowable by law for the title loan in Tennessee is 2 percent, along with any additional fees. The fees may cover management and administrative costs. These are limited to one fifth of the principal amount of the loan. After the second renewal, borrowers are required to pay at least 5% of the principal with each payment. This is a useful feature in Tennessee, which encourage borrowers to take their financial obligations seriously, in order to avoid potentially disastrous results from defaulting on the loan.
There are certain conditions and responsibilities imposed on lenders in Tennessee. They should be licensed by the state and have the full details of the vehicle they accept as collateral, as well as all borrower information. The contract should list the make and model of the car, as well as the VIN (vehicle identification number) and license plate number. It is mandatory to record all details regarding the initiation date of the loan and the terms agreed upon. This would include things like the interest rate, the amount of time allowed to the borrower to repay the loan, and any fees. One unique feature of title loans in Tennessee is that upon default of a loan, the lender may seek payment from the borrower for the expense of repossession of the vehicle. This is an intermediate step before final repossession. At this point the lender must agree to keep the vehicle for 20 days, giving the borrower some time to pay the amount owed. This again is the state trying to give the borrower every opportunity to meet his obligations before defaulting. If the borrower remains in default on the loan, the lender may then sell the vehicle to recoup his losses.