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How do title loans work in Tennessee?



June 16, 2023

How do title loans work in Tennessee?

Title loans are legal in Tennessee and are regulated under the Tennessee Title Pledge Act. This act outlines rules and regulations for title loan companies operating in Tennessee, covering aspects such as licensing, interest rates, lending practices, and disclosure requirements.

Here's how title loans work in Tennessee and their regulations

  1. Application process: To obtain a title loan in Tennessee, borrowers provide their vehicle details and paperwork, such as the vehicle's title, proof of insurance, valid government-issued ID, and proof of income. The lender evaluates the vehicle's value and condition to determine the loan amount they are willing to offer.
  2. Loan terms and fees: If the borrower agrees to the offered loan amount, the lender presents the loan terms, interest rates, and fees applicable to the loan. In Tennessee, title loan companies can charge up to 2% interest per month (equivalent to 24% per annum), and any title pledge agreements can have an initial term of 30 days, with the possibility of further renewals.
  3. Lien on the vehicle: Once the borrower agrees to the terms and signs the loan agreement, the lender places a lien on the vehicle's title. The borrower can continue using their vehicle during the loan term.
  4. Repayment: The borrower must repay the loan, including the principal amount, interest, and any fees according to the agreed-upon repayment schedule, which may require full repayment in as few as 30 days or provide the option to renew the loan.
  5. Loan default: If the borrower fails to repay the loan as agreed, the lender has the right to repossess the vehicle and sell it to recover the debt, complying with Tennessee's repossession laws and regulations, including providing the borrower with reasonable notice before selling the vehicle.

To understand Tennessee's specific regulations on title loans, you can refer to the Tennessee Title Pledge Act, available on the Tennessee Legislature website:

Title loans in Tennessee can come with high interest rates and short repayment terms, so it's essential to explore alternative financing options before considering this type of loan. These may include personal loans, credit cards, or borrowing from friends and family. If a title loan is necessary, be sure to only borrow what you can afford to repay and carefully review the loan terms and conditions.

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