How do title loans work in Illinois?

Are title loans legal in Illinois

Yes, title loans are legal in Illinois - they are capped at an annual percentage rate (APR) of 36%. They are regulated under the Predatory Loan Prevention Act. [1] [2]

Here's how title loans work in Illinois

In Illinois, title loans are a type of short-term, high-interest loan that uses the borrower's vehicle title as collateral. Here's how title loans work in Illinois:

1. Borrower Eligibility: To be eligible for a title loan in Illinois, a borrower must be at least 18 years old and have a lien-free vehicle title in their name. The borrower must also provide proof of income and residency.

2. Loan Application: Generally, borrowers need to fill out an application with a title loan lender, either online or at a physical location. The application typically requires personal information and details about the vehicle, such as its make, model, year, and mileage.

3. Vehicle Appraisal: The lender will appraise the vehicle's value to determine the maximum loan amount they are willing to offer. In Illinois, title loan amounts can be up to $4,000, depending on the value of the vehicle and the borrower's ability to repay the loan.

4. Loan Agreement: If the borrower agrees to the loan terms, they will need to sign a loan agreement. Generally, this agreement will outline the loan amount, interest rate, fees, and repayment schedule.

5. Funds Disbursement: Once the borrower signs the loan agreement, the lender will provide the loan funds. In return, the borrower will temporarily hand over their vehicle title to the lender as collateral.

6. Repayment: Generally, the borrower must repay the loan according to the terms specified in the loan agreement. In Illinois, title loans have a maximum term of 180 days. Payments typically include both principal and interest.

7. Retrieving the Title: Once the borrower fully repays the loan, the lender will return the vehicle title to the borrower. If the borrower cannot repay the loan or defaults on the loan, the lender has the right to repossess the vehicle and sell it to recover the outstanding loan balance.

It's essential to note that the Illinois Predatory Loan Prevention Act, which went into effect in 2021, impacts title loans in the state. The law caps the annual percentage rate (APR) on title loans at 36%. This new regulation aims to protect consumers from predatory lending practices and high-interest rates associated with title loans.

Additional information

Citations

[1] https://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=4088&ChapterID=67

[2] https://www.cnbc.com/2021/03/23/illinois-governor-signs-off-on-law-capping-consumer-loan-rates-at-36percent.html

Links

• https://illinoisattorneygeneral.gov/Page-Attachments/PredatoryLoans.pdf
• https://www.luc.edu/law/stories/our-stories/illinois-predatory-loan-prevention-act-paul-kantwill/
• https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-titlemax-to-pay-a-10-million-penalty-for-unlawful-title-loans-and-overcharging-military-families/
• https://www.propublica.org/article/how-title-loans-work

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