What is a Montana Title Loan?
A Montana title loan is an asset-based loan under the laws and regulations of the state of Montana. Title loans are secured by an asset which the borrower has put up as collateral (usually a vehicle), ensuring that, in the event of a default, the lender will be able to repossess the asset and sell it, keeping the total of the unpaid balance. Title loans tend to be short-term (usually, 30 day payment periods), relatively small (rarely higher than 10,000$), and feature high-interest rates.
Title lenders can be predatory, and in some states, title lending is not legal. For the states in which it is legal, each has its own laws and regulations to protect borrowers., some more severe, others more lenient.
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Title loans tend to feature high rates, though in some states these are capped to protect the borrower from falling too deeply into debt. In Montana, rates are capped relatively low at 36% per annum (3%per month).
Title loans are asset-based, meaning lenders need not ensure that the borrower has good enough credit to afford loan payments. All that is generally required is a lien-free asset, such as a car.
Montana has its own legislature regarding title loans, stating that:
32-5-301. – Interest rates may not be higher than 36% per annum. Fees for defaults or deferrals may not be higher than 5% (or $15, whichever is greater).
32-5-302. – Payments must be payable in regular installments, so as to avoid balloon payments; however, balloon payments are allowed if installments are sufficient to cover the interest from the previous installment period.