What You Need to Know
The state of Illinois regulates who can provide title loans, and the process they have to follow in order to protect you and make you aware of your rights. Before getting a loan, your lender must give you a pamphlet letting you know about debt management services that are available to you, and let you know of your rights and responsibilities. If you decide to get a title loan, your loan agreement should include a declaration that you received a toll-free number for the Department of Financial and Professional Regulation-Division Financial Institutions. They can assist with debt management services.
Regardless of your income or the value of the vehicle, a title loan in the state of Illinois cannot be for more than $4,000. Though this does not mean you will never have to pay more than $4,000 because the initial loan amount does not include interest or fees that may accumulate. This also does not mean you are guaranteed to be able to borrow $4,000 because how much you can borrow is still be based on things like income and vehicle value. Ultimately, how much you can borrow will be at the lender’s discretion.
Monthly Income Limitations
In addition to being no more than $4,000, you cannot get a loan for an amount that would require a monthly payment, including interest and fees, that is more than 50% of your pre-tax monthly income. Therefore, if you make $1,500 a month, before taxes, you will not be eligible for a loan that would require you to pay more than $750 a month. Prior to assessing your loan eligibility, your lender will need to verify your income. In order to do that, a lender must get a copy of your most recent pay stub or receipt, government benefit, and/or any other document that might apply.
Title loans must be fully amortized and repayable in equal installments so that your payment obligations are equally spread out. There are no Illinois state guidelines for how much interest should or should not be charged. However, the amount of interest you have to pay on the loan and when should be clearly laid out in the loan document before you agree to it.
Extensions & Refinancing
If after getting a title loan you find that you need more time to pay or your circumstances have changed, refinancing your current title loan is an option. But only if you’ve made enough payments to reduce the principal of the loan by 20%. So if you have a $2,000 loan, you cannot refinance unless you have paid at least $400 towards it. Even then, the principal amount of the new loan cannot be more than the outstanding balance on the refinanced loan. Your refinancing agreement should follow the same standards are your original loan agreement, and you can only refinance a title loan once.
You can only have one title loan at a time in the state of Illinois. Note you cannot apply for an additional title loan if you have had one outstanding or come due within 15 days prior to your application. Once you enter into a loan agreement, your lender must take possession of your vehicle’s title. However, within 24 hours of making full payment of the loan your title should be returned. In addition, any and all filed or recorded liens against the vehicle must be released, and evidence of the release must be provided. However, if the payment is made by check, your lender may delay releasing any liens and returning the title for five business days to confirm funds are available.
How You’re Protected from Repossession
Every time your lender notifies you that you are behind on your payments, they must also provide you with contact details for debt management services. It should be a toll-free number to a government-approved Division.
If you default on your loan, your vehicle becomes subject to repossession. Before repossessing our vehicle, your lender must give you the opportunity to surrender the car. You should be given a mutually reasonable and convenient time, date and place to make delivery possible. The lender must also give you the opportunity to remove personal belongings from the vehicle, for free. Your lender is not allowed to repossess your car after you default on your loan and then lease the vehicle back to you.
Once your car has been repossessed, it will be put up for sale so that the sale proceeds can be used towards your outstanding balance. If the car ends up selling for more than what your outstanding balance is then you are entitled to the overage. Imagine your car is used to secure a $2,000 loan. Then you default on the loan with an outstanding balance of $800, and the car is repossessed. After repossession, it is sold for $5,000. You are entitled to the $4,200 in excess of your debt ($5,000 sale proceeds – $800 loan balance). A lender may also charge you fees related to repossessing your vehicle, and these may be deducted from the sale proceeds. Your lender is not allowed to inflate fees.
Further Obligations & Fees
However, if your car is sold for less than what you owe your lender, including the outstanding loan amount and any additional fees, then you will still be liable for the remaining balance. You may even be sued by your lender to recover that amount. So if you owe $5,000 and your car is repossessed and sold for $3,200 you will still owe your lender the remaining $1,800.
“Idaho Adopted Admendments” Idaho Administrative Code, 2017,