What You Need to Know
If you are at least 18 years old (with government ID to prove it) and have a lien-free title in your name, you may be able to get a title loan in Arizona. You will be able to borrow as much as the lender is willing to give, which will probably depend greatly on the trade-in value of the car. A prospective lender may also inspect your vehicle to confirm the trade-in value based on actual condition and not just the typical make, model, and year of the vehicle.
Unlike in other states, Arizona law does not require you or your lender to keep possession of your vehicle’s title, though this does not stop the lender from securing a lien against it. While it is not state mandated a lender may very well ask that the vehicle’s title be turned over, just to be on the safe side. Given that the state-mandated legal requirements are so minimal, most requirements for getting a title loan, like maintaining insurance on the vehicle will be mandated by the individual lender, not by the state.
When applying for and negotiating a title loan, you will probably have many questions and your lender will be the best person to answer these. When deciding on a loan agreement that eventually becomes a contract your lender should tell you the interest rate he/she intends to charge and give you a payment schedule. It is important to get all your questions answered before you enter the contract. Your loan agreement should also include the name and address of the title loan office, and yours.
Lenders are entitled to charge interest on loans, but the state of Arizona has put a limit on how much interest they are allowed to charge. There is no minimum interest requirement, so interest rates may be lower, but the limits are:
- For loans of $500 or less, the maximum monthly interest rate that can be charged is 17%.
- For loans between $501 and $2,500 the maximum monthly interest rate that can be charged is 15%.
- For loans between $2,501 and $5,000 the maximum monthly interest rate that can be charged is 13%.
- For loans of $5,001 or more, the maximum monthly interest rate that can be charged is 10%.
While there is a limit on how much interest you can be charged, there is no term length limit. That means a loan can last for as long as the two parties agree it should, but the due dates of any payments should be carefully laid out no matter the duration of the loan. If a borrower misses a payment by ten days, on the 10th day they can be charged a late fee of up to 5% of the unpaid installment.
Requesting an Extension
If you are going to be more than ten days late on a payment and require an extension, you should let your lender know. Extensions are available if the lender agrees to it, and the requirements to qualify for an extension will vary on a lender-by-lender basis. Typically, paying the owed interest is enough to extend the loan and carry the principal into a new loan period.
For example, if you took out a $1500 30-day loan at a 15% interest rate and then found that you couldn’t pay the loan off in full in 30 days and needed an extension, your lender might require that you pay the interest only, $225 (15% of 1500) and then extend the loan for another 30 days during which you’re expected to pay the $225 interest charge again and the principal of $1500.
How You’re Protected from Repossession
If you do not make the payments required in your loan contract, you will be in default. (Though you may also default on your loan by failing to meet other requirements in the contract non-payment is the most common). Once you have defaulted on your loan, your vehicle is at risk of being repossessed. Your lender is under no obligation to alert you that you have defaulted and that your car can be repossessed at any moment. This does not mean that just because they do not have to that your lender will not contact you.
If alternative arrangements are not made and agreed to, then your lender may get a court order and at any moment repossess the vehicle you used as collateral. After your car is repossessed and a sale has been arranged your lender should notify you of the date of sale. At this point, even after repossession, both parties can arrange for the balance to be paid in full or in installments. If so, you can keep your vehicle. The new balance owed will include the cost of repossession, preparing for sale, and all related costs.
You May Be Responsible for Additional Charges
If no agreement is made and the vehicle is sold, the money should be applied to the borrower’s balance. The balance will include the amount of default plus further interest and costs associated with repossession and sale. If the car sells for more than is owed the excess belongs to the borrower. However, if the vehicle sells for less than what is owed, the lender is still entitled to receive the full balance. Therefore, they may continue to bill you for the difference.
“Arizona Revised Statutes” Arizona State Legislature, 2017,