What You Need to Know
The state of Missouri has specific laws and regulations for who is able to make title loans and how they must conduct their business. Title lenders are regulated in the same way as pawnbrokers or other short-term lenders. However, the state of Missouri has regulations specifically designed for title loans and their unique processes. This means the state of Missouri has gone out of its way to think ahead and in the interest of the borrower.
If you get a title loan, your loan agreement must be in writing, and signed. By giving your lender permission to keep your title as collateral, you are giving them a security interest in your vehicle. You will be able to redeem your title by repaying the loan in full and complying with the loan agreement. If you fail to pay off your loan and redeem your title, your vehicle may be repossessed and sold.
State law says you cannot get a title loan for more than $5,000 but the exact amount you can get through a title loan is to be agreed to between you and your lender. However, during negotiations your lender is required to consider your financial ability to repay the loan.
Extensions & Refinancing
All title loans must be for at least 30 days. If you have difficulty paying by your due date you can request a renewal in writing. You must be prepared to pay all the interest due at that time to receive a renewal. Therefore, if you are paying 30% interest on a $2,500 loan and you cannot pay it off by the due date, you can elect to pay $750 in interest instead, and extend your loan payment date. By the third renewal, and for any renewals afterwards, you will need to pay 10% towards the principal and not just the interest.
All of the provisions of the loan document should be explained to you and you should make sure you understand them before proceeding. After all, you are entering into a legally binding contract and will have many obligations. The law requires your lender make a number of disclosures to you before reaching a loan agreement. Some of these disclosures include:
- The name, business, address, telephone number, and certificate number of your lender, and your name and address.
- Monthly interest rate.
- You may cancel a loan, without penalty, by returning the full amount by the close of the next business day after the loan was received.
- By using your vehicle’s title as collateral in a loan you are putting it at risk. If you fail to make payments on time your vehicle may be repossessed.
- The location and operating hours of a place where your vehicle may be delivered you default on your loan.
How You’re Protected from Repossession
If you do not pay your loan, the original one or any renewal, you will default on your loan. This means your vehicle is at risk of being repossessed. After you have missed a payment by 10 days, your lender may begin the repossession process. If you do not surrender and deliver your vehicle after 10 days in default, your lender may take the first step in the repossession process. You will be sent or delivered a notice. The notice should include the following:
- Name, address, and telephone number of the lender.
- Account number, if any.
- Amount that is past due and the last possible day to pay it.
- The statement: If you pay the amount due now by the date I’ve provided you may continue with the contract as though you were not late. If not, we may exercise our rights under the law, i.e. initiate repossession and sale proceedings.
- The statement: Even if you voluntarily surrender your vehicle you could still owe additional money if the car sells for less than you owe.
You will have at least 20 days, more if specified in the notice, from the date of this notice to pay your balance in full. So you’ll have 30 days in total (10 day waiting period + 20 days after notice) to pay off your loan and prevent repossession.
If your balance is still not paid your vehicle may be repossessed at any time in accordance with the state’s laws regarding repossession. Once the car is repossessed, or voluntarily surrendered, your lender will try to sell it to recover the money they have lost on the defaulted loan. Before the sale takes place, you must be notified of the time, date, and specific details of the sale, including the effect it can have on you and what you owe. This gives you one last opportunity to keep possession of your car by buying it at the scheduled sale.
Once your car is sold, you should receive another notice outlining what the car sold for, how its proceeds will be applied to your bill, and what affect it has. If your car is repossessed and sold for more than you owe, the lender is not entitled to keep that money. They should arrange to have the surplus returned to you. However, if your vehicle is repossessed and sold for less than what you owe you may still be liable for the difference. Unless the amount you owed at the time of default was less than $300.
Further Obligations & Fees
For example, if your car sells for $4,300 and you owe $5,500 then you are still on the hook for $1,200. However, if it sold for $5,500 to cover a $4,300 debt then your lender will owe you $1,200. There is an exception if your vehicle is repossessed and sold to recover less than $300. If after repossession, the car is sold for less than $300 no further action can be taken against you to pay the remaining balance.
In any event, if your lender wants to recover the remaining balance after your vehicle has been sold he/she must first give you notice of their intent to take legal action.
“Business and Financial Institutions” Missouri Revisor of Statutes, 2018,