It is important to understand the interest rates components, every time you happen to go for title loans. Besides knowing the rates, this will also facilitate your shopping around for the best options for your case. If you can be able to break down the interest rate components then you stand a better chance to get the best the market has to offer through the competitive packages
Exploring the limits for Interest rates
The expressions of interest rates are either on a monthly percentage or the annual percentage (APR) this is not complicated since you get to divide the APR by 12 to get the monthly percentage.
For instance, if you look up monthly interest rate is 25%, that will translate to an APR of 25% X 12 months =300 %( and the reverse is also applicable)
Most states fall into four subcategories; this is according to how they treat their interest rate limits. Those subcategories are;
- No limit
As per the name, the state has just no set limit and that means that the lenders can charge you at different rates competitively. Some of the states that fall hereunder are Idaho, Delaware and also Illinois
- One set limit
In this case, the state applies one blanket rate that is applicable to all the loans. This simply a flat rate that applies to all regardless of your time factors. This is applicable in the states of Alabama and Mississippi at 25%, again this is just for simplicity
- Limitation by the amount borrowed
The state of Florida falls under this category, and it’s quite complex. The state sets graduated scale with applicable charges for each.
The case for Florida is for less than $2,000 highest charge is 30% APR, More than $2,000 but less than $300, highest charge is 24% APR, More than $3,000 applicable charge is 18%
This is noted as Florida appears as one of the best protectors of borrowers of title loans. The other states with similar treatments of interest rates are Virginia and Arizona, with slight variations in the percentages.
- Limits on Length of Title loans
This is also another complex category. The interest rates depend on the length of time the loan remains outstanding… This is the applicable case in the states of Georgia and Tennessee.
For instance in Georgia, the applicable rate is at 25% P.M for the first 3 months, followed by 12%pm for subsequent months. The case for Tennessee is a 22% which is divided by the number of months you have for the loan. It is interesting to note that the longer you have, the lesser you will pay for the Tennessee case of interest loan rates
Beyond the chargeable interest rates
This is to remind you that some states charge more than just interest on the title loans. This is occasioned by some states allowing for some charges beyond what is stated as the repayable percentage. To better understand and be able to get a more detailed breakdown, it is very important to always read and countercheck the details of the contract you sign upon. The contract has the finer details of what you eventually pay as interest rates.