Why North Carolinians are Driving to South Carolina for Title Loans

North Carolinians are driving to South Carolina for title loans because title loans are illegal in the Tar Heel State. North Carolina has also illegalized payday loans. According to many estimates, residents of North Carolina are supposedly saving hundreds of millions of dollars every year because they are not being compelled to pay the high rates of interest that title loans payday loans typically levy. However, in the absence of such loans, most people in need do not have any means to attend to their immediate financial problems. The urgency in a crisis, howsoever short term it may be, and the lack of options as title loans are illegal in North Carolina, many residents of the Old North State are driving to South Carolina.

Title Loan Laws in South Carolina

There are some states that have laws illegalizing short term secured loans such as title loans and unsecured loans such as payday loans. Many states do not have regulations explicitly banning them and lenders use existing loopholes in the acts or laws to offer title loans and payday loans. South Carolina is one of the thirteen states in the country that is absolutely unambiguously explicit that title loans are legal. The nature of the loan and prevailing regulations are similar to those in the other states where title loans are legal.

In South Carolina, a borrower can use their personal car or commercial vehicle as the security or collateral to get a short term loan. The borrower needs to furnish the original title of the copy and give it up to the lender, which implies transfer of ownership for the term of the loan. However, the car or vehicle remains in possession of the borrower. The borrower can repay the title loan amount along with the accrued interest and take back the original title of the car or vehicle.

Regulations pertaining to Title Loans in South Carolina

Lenders in South Carolina will offer a loan based on the present market value of the car. This figure is actually the resale value, the amount that a lender can actually recoup if the car or vehicle is sold or auction. It is not a figure on paper which is unrealizable in reality. Lenders will not offer a loan amount that is equal to the resale or market value of the car. The loan amount could be as little as 20% or as much as 50% of the resale value of the car.

Most title loans have an initial term length of thirty days or a month. This is the minimum term that lenders can propose. Lenders have the liberty to offer a much longer term. It is not uncommon for borrowers to have sixty days or a hundred and twenty days to repay. However, the initial term of repayment cannot exceed four months or a hundred and twenty days. The repayment term can be renewed, whether the initial term was a month or four months. If a loan amount is not fully paid along with the accrued interest by the end of the term of thirty days or the period decided by the lender and agreed upon by the borrower, then the term can be renewed for an additional thirty days or the initial term. If the initial repayment term was sixty days, then the renewal would also be of sixty days. There are exceptions though.

The laws governing title loans in South Carolina cap the maximum renewals to six. A lender can renew the repayment term up to six times and each of these renewals should be of the exact number of days or months as the original term. There is also a cap on the maximum period of time a borrower can be provided to repay the full loan with impending interest. The six renewals should not exceed two hundred and forty days or eight months. In effect, if the initial term was a hundred and twenty days then only one renewal is legally permitted, thereby allowing the borrower four more months to repay the full loan with interest and any other fees that might be applicable.

The rates of interest cannot change or vary through the term of repayment. The rate cannot change even when the first term is renewed or subsequent renewals are approved. However, there can be other charges, such as penalties or lien recording fees. The renewals would not factor in the accrued interest and pile it with the principal amount. Only the principal amount is to be taken forward as the pending amount, although the impending interests must be paid. The interest calculated has to be on the original principal amount or on the remaining loan amount at the time of renewals.

There are no renewals after the sixth time and no interest would apply afterward. Borrowers would have the scope to pay in installments. When impending loans are settled, lenders may or may not charge any rate of interest or other fees. The amounts borrowers can apply for as title loans in South Carolina range between $600 up to $2,500. Lenders are required to operate on the basis of good faith judgment while assessing a loan application. They don’t need to verify the income or employment status of a borrower. They are also required to mention to the borrower that title loans are high interest short term loans and that there are other low interest loans available.

 

Posted in: Personal Finance

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