What is a Kentucky Title Loan?
Kentucky title loans are loans where the borrower provides an asset to serve as collateral which secures the loan. If the borrower defaults, the lender may then repossess the asset and sell it to cover the cost of the loan. Title loans are hence often for small amounts, short term, and come with high-interest rates. Most often, an automobile is used as collateral, so that the amount of a title loan will usually be determined by the value of the car. Title lenders are often predatory, and title loans are therefore not legal in every state. The states in which they are legal will have their own respective laws to regulate title lending, in order to protect borrowers from falling too far into debt with title lenders. Below, we at Online Loans have broken down the assorted information available across the web into a convenient need-to-know to make getting your title loan as simple as possible.
Table of Contents
Title loan interest rates tend to be higher than with most other loans since they are usually for smaller amounts and for short periods of time. In some states, there are no laws limiting how high a lender can set an interest rate. Other states have laws capping rates at a certain percentage. In Kentucky, for instance, title lenders may not charge an interest rate greater than 25% per month.
Since title loans are secured by an asset, lenders will not typically require any particular credit standard. That is, whether the borrower is likely to be able to pay off the loan is not generally a matter of concern, since the lender is guaranteed the value of the asset (on which the value of the loan is based). All that is generally required to obtain a title loan is a title-free asset (most often a car), a government I.D., and to be 18 years of age. In Kentucky, lenders are required to perform background investigation check for criminal records before accepting loan applicants.
Kentucky regulates title lending as follows: 286.10-210 – Lenders must be licensed 286.10-285 – Loans must be no more than $4000. 286.10-260 – Title loans may not be renewed more than three times, for periods of at least 30 days, with no added interest or fees other than those belonging to the original principal. 286.10-275 – After repossessing the borrower’s title, lender’s may not sell the title in less 20 days or more than 60 days.