A new bill has passed in Virginia setting new guidelines for car title loans. This bill will enforce caps on interest rates and loan terms which is something that has not been done before. Similar to a law in Tennessee the loans are restricted to a year in length, restrict the loan amount to half of the car’s value in addition to preventing new interest being added onto the loan once the car has been repossessed. A tiered interest rate cap will be put into effect, running from 22 percent per month for a loan smaller than $700, to a maximum 15 percent for loans higher than $1,400.
Car title loans are a topic of controversy lately in a similar way to payday loans. The loans both help consumers who are in need and would not have other options, but can be at times tricky for consumers to understand if they are not taking the time to read the terms. The consumer needs to always be aware of the terms of the loan and the interest rate they will be paying. If applying for a loan, being as educated as possible can help the consumer know all options available and prepare/make a plan to use the loan responsibly.