Car Title Loans
Before new legislation was adopted by the Iowa Legislature in 2007, car title loans were a very expensive way to borrow money. The new legislation limits the amount of interest that can be charged. This can still be an expensive loan. If you don't payback the loan, you can lose your car. In any case, it is always better to seek credit from lenders who offer lower rates. Here's how a car title loan might work:
To get a loan, you give a car title lender the title to your car in return for a cash loan. You keep the car but the loan company keeps the title. If you do not make payments, the company can take the car and sell it to someone else. The title company may even keep an extra set of keys to make it easier to repossess the car. The first loan payment can be due just fifteen to thirty days after you get the loan. Under the new car title loan limits on finance charges, the interest rate can be as high as 36%. If you miss a payment, the car title company can repossess the car.
Until the new Iowa law has been in effect for a longer time, it is not clear how many car title loan companies will stay in the state. No matter what happens, be a smart shopper for credit. If you need a loan, go first to a local bank or credit union. Banks and credit unions can make loans secured by cars and they can do it at lower interest rates than car title lenders. The Iowa legislature also gave new authority to credit unions to make smaller loans to borrowers who may not qualify for a loan from a conventional lender.
If you have a car title loan and have questions about your rights, contact Iowa Legal Aid at 1-800-532-1503.