What is a Kansas Title Loan?
Title loans are loans where an asset is put up as collateral by the borrower so that the loan is secured in the event of a default by the value of the asset (generally an automobile). Title loans tend to be short-term (often 30 days) and relatively small (usually less than $10,000), and therefore often characterized by high-interest rates.
Title loans are not legal in every state and are regulated differently for each state in which they are legal. Interest rates and loan amounts are capped in certain states, for example. Other fees such as late payments may also have limits to further protect the borrower from being overtaken by debt. In Kansas, for instance, lenders may not charge more than 5% of the payment which was late (or $25, depending on which is less) for late payments.
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In many states, for example, interest rates cannot be above a certain percentage. In Kansas (and many other states), such limits do not exist, so lenders can charge anything they want for interest rates. Average rates are roughly 30% and will depend on what the borrower and lender agree to.
When it comes to title loans, lenders are generally interested in the value of the asset, rather than the borrower’s financial standing. Usually, all that is required to obtain a title loan is a lien-free car and a government-issued I.D. In Kansas, certain extra requirements also exist, such as a utility bill proving residency, and proof of income which ensures the lender that you have the means to pay off the loan.
Kansas legislation KS Stat § 16a-2-308 (2017) restricts title loans as follows:
Loans of $1000 or less with an interest of 12% or more must be made payable in regular (more or less equal) installments. Loans with an interest of more than $300 must have a payment period that does not exceed 37 months. Finally, loans with interest below $300 must have a payment period not exceeding 25 months.