What You Need to Know
The state of Alabama requires title loan lenders to be licensed, which means they are being regulated by the state to protect you, the consumer, against things like fraud. That also means that in the unlikely event things go wrong, or a lender does not follow the laws set forth by the state, you can take legal action. For example, if you got a loan from a lender that was not properly licensed then the loan would be considered void.
Lenders are regulated in the same way that pawnbrokers are, and you must be at least 19 years old to receive a title loan. The state has also laid out specific, often predatory practices, which lenders are not allowed to engage in, including engaging in false advertising and selling or charging for any kind of insurance. The amount of money you can borrow will be up to the lender’s discretion but should be based at least partially on your income and the value of the vehicle you are offering as collateral.
- An accurate description of the vehicle (make, model, year, etc.)
- Your name, address, and date of birth
- Date of the loan
- Type of ID and ID number presented by you
- Your description, including approximate height, sex, and race
- Amount of the loan
- The agreed upon repayment date of the loan and the amount due
- The monthly rate and charges
Loan Process & Repayment
By or before the agreed repayment date you should pay the lender the full amount as agreed, which means the amount borrowed plus the agreed upon interest. You and your lender may agree to a charge instead of interest, but this charge cannot exceed 25% of the loan per month. By law, a lender is not entitled to receive any payments that exceed the 25%, so if your loan is for $3,000, the additional charges cannot be greater than $750 ($3750 in total).
The lender may take possession of the title of your vehicle until the loan is repaid, but you continue to have full use of the car. The lender will have a lien against the title of your vehicle for the amount owed (loan amount plus interest/fees) until the loan is repaid. Also, for the period of the loan you, and you alone, have the right to redeem the loan property (your vehicle title). So for the agreed upon repayment period you do not have to worry about someone else claiming your title by paying the balance of the loan or through any other agreement.
Lost, Stolen, or Destroyed Contracts
At the time the loan agreement is created it should include all legally required provisions and agreed upon terms, and be signed by both parties. If at any time the agreement document you were given is lost, destroyed, or stolen you should immediately let the lender know, in writing. When the lender receives this notice, the original document becomes invalid if the title has not already been redeemed.
Before delivering the title or issuing a new document, the lender will require you to make a written statement of the loss, destruction, or theft of the ticket. This statement shall be signed by the lender or his employee, and he/she is entitled to receive a fee of no more than $5 in connection with each lost, damaged, or stolen loan document and relevant statement.
How You’re Protected from Repossession
If the loan is not repaid by the agreed repayment date, the lender shall hold the title for an additional 30 days. During that 30-day period, you may redeem your title by paying the originally agreed price (amount of loan plus interest or charges) and an additional charge equal to the original one.
If no payment, or no full payment, is made up to that date then you’ll have an additional 30 days to pay the balance and redeem your title, but you will now have to pay the interest charge of $750 again. Making the total owed $4500 ($3,000 loan + $750 interest charge + $750 charge for missing the payment deadline). If you have made payments toward the balance before this date, they will also be reflected in your balance.
In other states, vehicles may be repossessed and sold to recover unpaid loan amounts, meaning sale proceeds are used to cover your debt and you are entitled to the surplus. In the state of Alabama failure to repay a title loan within 30 days of the repayment date results in automatic and complete forfeiture of the vehicle. You are not entitled to any sale proceeds. This means failure to pay the balance of a $3,000 loan can result in repossession of a vehicle, even if it is worth substantially more than that.
All the laws and procedures explained here apply to the entire state of Alabama. But individual counties or municipalities can enact ordinances that are different from the state. Therefore, for a better idea of all the laws of title loans that may apply to you, you may also want to research if your county or municipality has any specific regulations. However, no county or municipality may make ordinances that are stricter than those presented here.
“Code of Alabama 1975” Alabama Legislature, 2017,