Securities lending has become very popular in the South in recent years. However, many people are unaware of the difference and legality behind title loans and title pawns. Some of you reading this may not have known they were different until this second – and that’s okay! We will tell you everything.
The difference between title loans and title pawns
Yes that’s right, they are both very similar. However, you should know the difference as one is legal and the other is illegal in the state of Georgia! So let’s go, okay?
A title loan is a type of financial aid that uses the title of your vehicle as collateral so that you can borrow funds. You don’t need to have perfect credit, but some providers will verify that you are not bankrupt.
Some companies refer to them as car title loans, pink card loans, auto equity loans, auto equity loans, etc. This is how they get confused and go under the radar of state law because securities lending in Georgia is illegal.
A title pawn, on the other hand, is absolutely legal in Georgia. However, they still use the title of your vehicle as collateral. Plus, there’s no thorough credit check.
So what’s the difference? Well, you have to be okay with the fact that you will be separated from your vehicle title for the duration of the loan term.
The dangers of title pawns
Now, if you can afford to pay off your loan, the title pawns are safe. However, it’s incredibly easy to fall into the debt cycle if you’re not careful and planning properly.
If you haven’t heard of the Common Debt Cycle or Debt Trap as it’s otherwise known, here’s how it works:
- You take out a title pawnbroker.
- You realize that you can’t refund it for some reason.
- You take out another loan to pay off the original title loan.
- You cannot afford to pay off the second loan.
- So you take out another loan.
- Therefore, a cycle was born, a cycle from which it is extremely difficult to break free.
Yes, that can get you in a really bad spot, very quickly. Not to mention, they don’t take life too nicely by throwing expensive and catastrophic curve balls at you!
Fortunately, there are ways to plan ahead and see if you can afford it before signing up for anything.
To get started, you can use a free online loan calculator. Here you enter the loan amount, the interest rate, how much you can afford to pay each month, and the term. Then he will tell you if you can afford the loan. Sounds good, doesn’t it?
Once you’ve done that, save for your loan. It sounds rather counterintuitive, but it can keep you from falling into the terrible debt cycle we talked about earlier. Setting aside a specified amount until when you need a loan can help you meet your repayment deadline and ultimately keep your vehicle and life intact.
New Usury Laws To Make Title Tokens Safer For You
Hopefully, we didn’t just put you off the idea of ââgetting a title pawn. Why? Because Georgia has enacted new usury laws to make acquiring much safer for you. Let’s take a look at the details.
As we mentioned at the start, title pawns have become increasingly popular over the years – and trust us, the federal government has noticed! Therefore, they cracked down on the title pawn industry, to help protect your financial health.
The new usury laws have been enacted by the Consumer Financial Protection Bureau. This regulation requires pawn shops to determine if you can repay the loan before giving it to you. While people shouldn’t take loans if they can’t afford to pay them back, the Usury Act has helped people (who would otherwise make rash decisions in times of crisis) to stay out of business. debt cycle.
Time scale and repayment terms
Since title tokens fall into the âpawnshopâ category, providers can charge you up to 25% interest per month for the first 90 days (plus fees). After that, it goes down, but there is an additional charge for each day you go over the 90-day âlimitâ.
It is important to note, however, that these tokens must be issued for 30 days (as stated in the Usury Act). If you can’t pay it off so quickly, the term will be extended in 30-day increments. For those who hit three extensions, you’re entering the debt cycle, so try your best not to keep asking for more time – you’ll end up paying a lot more than it’s worth.
If you’ve ever taken out a title loan, you know the requirements. They haven’t changed much under the new usury laws. Either way, we’ll take a look at them now.
The contract requirements are as follows:
- The 30-day interest rate;
- The payment of extensions and the related costs;
- The start and end date of the repayment term;
- The total amount (in dollars) that must be reimbursed; and
- The declaration informing you that if you do not pay, your vehicle will be taken back.
Watch out for these providers
Unfortunately, there are still companies operating in Georgia that illegally offer securities loans. These suppliers will not provide you with legal documents and will not follow usury laws. Not to mention that their interest rates are appallingly high.
To avoid selling your soul to these illegal lenders, be sure to do your research. The internet is full of reviews for all the places you could go, so check them out first. This will save you a world of hassle in the end.
The final take
We know it was a lot of information that was definitely a little confusing and a little bit scary. But don’t worry, you can find a summary below to ease your nerves and show you that there is nothing to worry about (as long as you plan!).
- Title pawns in Georgia are legal, title loans are not.
- You can use online calculators to check whether you can afford it or not.
- New usury laws have been enacted by the Consumer Financial Protection Bureau.
- These laws ensure that the lender must verify that you can afford to repay them in full before allowing you to sign the agreement.