Title loans are available in Alabama. These are what we consider title pawns, in other words very short term loans. In fact, title loans is Alabama ar governed by the Alabama Pawn Shop Act.
In that sense it is just like you were pawning your car, the only real difference being you continue to own and drive your car during the loan period. A summary of certain requirements follows.
Type of Title Loan
As we’ve written about many times, title loans are typically either single payment loans or monthly installment loans.
Single Payment or Monthly Installment?
Alabama title loans are single payment title loans (or title pawns). The full amount of the loan, plus interest and fees, is due at the end of the loan term.
Every state has different rules about how much interest a lender is permitted to charge. The maximum allowable interest rate in a Alabama is 25% per month. This is on the high end of the scale for title loan interest rates.
Just because lenders can charge up to 25% per month, however, does not meant that all lenders do so. In fact, some of the best title loan companies charge a fraction of this rate.
Title Loan Fees
In addition to interest rates, title loan fees are also regulated at the state level.
Lien fees are the fees the lender pays to record their lien on your title. It is reasonable for a lender to recover this fee from the borrower, as long as it is the actual cost to record the lien.
In Alabama since the loan is considered a title pawn the lender does not record a lien on the title so there is no lien fee.
Some other terms that change from state to state include repossession requirements, roll over limits, and others. Find out why title loan roll overs are not a good idea.
If you default on any title loan the lender can repossess the vehicle to recover their costs. The question is what happens to the proceeds from the sale of the vehicle should you owe a small fraction of what your vehicle is worth?
In some states the lender is required to return any surplus from the sale of the vehicle to the borrower. Unfortunately this is not the case in Alabama. The lender is permitted to keep any amount from the sale of the vehicle, regardless of the outstanding loan balance.
Alabama Repossession Examples
Here are a couple of examples to illustrate what could happen if you default on a title loan in Alabama.
|Loan Balance||Vehicle Value||Amount Returned|
As you can see from the table above, losing your car by defaulting on a title loan in Alabama means losing your car regardless of how much you might owe on your title loan. This is why it is so important to prepare properly and make sure, without a doubt, that you can repay your title loan on time and in full.
Right to Cure
In Alabama borrowers do have 30 days to cure the default prior to losing the vehicle. All payments must be made in full to cure the default.
In Alabama title loans are very short term high interest loans that should be used carefully. The fact that you only have thirty days to repay the loan in full, combined with the fact that you can lose your vehicle and any surplus from the sale of the vehicle, means you should be certain you can repay the loan in full before proceeding. Perform the necessary title loan preparation before proceeding.
These loans are considered title pawns and are treated as such. Think of a title loan in Alabama as pawning your car, the only difference is you continue to drive it instead of leaving it at the pawn shop.