This is a great question that we get asked often; we will do our best to answer it in this post. The first thing you need to focus on, before you get a title loan, is: What is my role in this transaction? Make sure you understand both your rights and responsibilities as a borrower. Consider how, and if, you can repay the loan. If you have any doubts, do not take the loan! The Virginia State Corporation Commission (SCC) has put together a pamphlet which you can find here, that outlines these rights and responsibilities.
Next, you will want to choose a lender. Too often, borrowers simply look for the title lender nearest their home, without any research on other options. This can be a very costly mistake! It pays to do your research, before rushing out to the closest lender. Just like every industry, there are reputable companies, and other companies that operate outside of the laws and regulations. INTEREST RATES CAN VARY WIDELY FROM ONE LENDER TO ANOTHER. We suggest you take a little time, and call a few to find out their rates, before you make a choice. If the lender will not provide you their rates before you visit them, ask them why, or simply move on. Some lenders choose to make you go through the entire loan process before showing you your rate, hoping you will just sign the contract because you have already invested your time and effort. Also, find out what type of payments the lender accepts. Some lenders allow you to pay by mail, phone, or online, saving you time and money.
Finally, there is the issue of your vehicle’s value. Some lenders have minimum and maximum values upon which they will lend. Read our blog entitled “What is my car really worth?” to get an estimate of your car’s value. (Ultimately, that estimate will have to be confirmed or rejected by the title lender’s appraiser.) Virginia rules allow licensed title lenders to lend up to 50% of the vehicle’s fair market value. Be wary of loan suggestions that are higher than that.
Once you choose a lender, verify that the lender is licensed. A licensed Title Lender, in Virginia, is required to post their license at their business location(s), and they can also be looked up at the SCC’s site (www.scc.virginia.gov/bfi/). Then, get your documentation ready (lien free title, insurance information, ID, proof of address, and proof of ability to repay the loan) and visit the lender.
When you get to the lender, take your time, and read everything carefully before signing anything. Ask questions until you fully understand everything. If you are uncomfortable asking questions, bring a friend or family member with you. If possible, make an appointment with the lender when you have some time, so you are not in a hurry. This is very important. Some lenders have started offering “Consumer Loans” which are secured by your vehicle, but are not governed by VA Title lending laws; make sure you understand what kind of loan you are getting. If it is not a Title Loan, you will not be protected by the title lending laws and regulations.
Ask questions and make sure you understand all terms and conditions of your loan offer before agreeing to it. If you are uncomfortable with any of the terms or conditions do not agree to them and don’t be afraid to walk out. If you do end up rushing into a Title Loan with terms you wish you didn’t agree to it; you do have until close of business on the following day to return the loan proceeds and cancel the loan.
In summary, some people will benefit from using title loans as a source of funds in a financial emergency situation. All people, who choose to get a title loan, will benefit from a thorough comparison between Title Lenders who offer such loans.