What is a South Carolina Title Loan?
A South Carolina Title loan is an asset-based loan under the laws of South Carolina. Title loans are secured by an asset, usually, a car, put up by the borrower as collateral. Lenders are then able to repossess the asset and sell it to pay off the remaining balance in case the borrower defaults. Loan amounts are usually small and determined mainly by the value of the asset. They are also typically short-term and feature high rates.
Title lending companies have a history of predatory lending, and many states have banned the practice. For the states in which it is legal, there are laws regulated the practice, often by placing limits on loan amounts, interest rates, payment terms, and other fees.
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Like many states, South Carolina does not place a limit on interest rates. Average title loan interest rates are around 25% per month, which amounts to an APR of 300%.
Typically, title loans do not have credit requirements, since they are secured by the value of the borrower’s asset rather than the guarantee that he or she has the financial stability to afford payments. In South Carolina, lenders are however required to check the borrower’s employment, income, and monthly debts in order to form an idea of whether or not they are likely to be able to afford payments.
South Carolina legislation section 37-3-413 states that:
- Title loans must be for a period of a least one month, and no more than 120 days
- Lenders are not allowed to renew a loan more than 6 times, and interest cannot be charged after the 6th renewal
- Lenders must state conspicuously in the loan agreement that they are securing a high-interest loan, and that the borrower is encouraged to take out a lower-interest loan if possible