How to Open a Car Title Loan Company

For both car title loan lenders and their customers: California

Exercise caution before borrowing money via an automobile title loan.

Title loans require the borrower to sign over the title (pink slip) to your car, RV, motorcycle, boat, mobile home as collateral for your title loan.

If you miss payments or default on your car title loan, the lender can take your vehicle.

Tips for consumers considering an auto title loan:

• Borrow only as much money as you can afford to fully repay when the payment is due.
• You have the right to full disclosure in your contract of all interest charges, the annual percentage rate (APR) of the loan and all fees.
• The final contract must be in the language in which you negotiated it.
• Before you take out a title loan, read the contract thoroughly and be sure you understand all the terms.
• Once the title loan agreement is signed, you are legally responsible to fulfill the obligations in the contract.
• Be aware some title loan lenders use remote engine shutdown devices that allow them to turn off your car if you don’t make payments. Some of these devices have GPS tracking capability.
• These car starter interrupt devices must be disclosed to the borrower.
• Car title loans are quick and easy to obtain but borrower’s will “pay through the nose” to get one.
• Borrowers should reach out to family, friends, peers, church, their employer… all possible alternatives before getting a car title loan. Of course, who really wants to disclose their temporary financial hardship to anyone but a car title loan professional? NO ONE!

Examples of car title loan alternatives include asking your employer for an advance on your next paycheck; finding out if your bank or credit union provides short-term credit products; asking creditors for more time to pay your bills; asking for a loan from a relative or friend.

Auto title loans typically are advertised as short-term loans for people who need money quickly but may not have access to more conventional loans, due to temporary financial challenges and low credit scores.

Few assets are more important to Californians’ financial security than their cars.

Borrowers who use their auto titles as loan collateral are risking that asset.

Car title lending can be VERY profitable for the lenders. APR’s exceed 100% per year.

Car title loans are an expensive solution for borrowers in financial straits.

The amount of these loans is always less than what the car is worth. Smart car title loan lenders only loan a maximum of 50% of the “low Book value” of the car.

WARNING: IN CALIFORNIA – AND MOST STATES – FOR ALMOST ALL AUTO TITLE LOANS, THE INTEREST RATE LENDERS CAN CHARGE IS UNLIMITED.

CAR TITLE LOANS ARE A LOAN PRODUCT OF LAST RESORT FOR BORROWERS.

Current California state law does not limit interest rates for consumer loans of $2,500 or more. [CFL License.] This includes car title loans.

Last year, nearly 100 percent (99.99 %) of auto title loans equaled or exceeded that $2500 threshold.

The APR (annualized interest rate) on the vast majority of car title loans was 70% to 100% plus.

Start a Title Loan Business

Title loan lenders who follow the “Best Practices” discussed in our “How to Start a Car Title Loan Business” will disclose ALL fees, interest rates, add-ons… to the borrower before the title loan is consummated. [You want to learn how to make money with a car title loan business? Click here.]

Car title loan borrowers should carefully review the terms of the loan BEFORE signing the title loan contract.

Always check with the California Department of Business Oversight on a company’s license BEFORE entering into an agreement for an auto title loan.

www.dbo.ca.gov 1-866-275-2677