Zero Percent Title Loans

Auto title loans are among the most attractive borrowing options for the average person. These loans come with none of the hassles of traditional bank loans, and they often avoid the high costs associated with payday loans and many other short-term credit options. Of all the many different Tampa title loans available to individuals, couples and even businesses, zero percent title loans in particular are generating a lot of interest—or not. After all, who doesn’t want to borrow the money they need while avoiding interest as well as fees and other expenses.

What is a title loan?

A title loan is a secured loan, and the collateral for a vehicle title loan is the free-and-clear title of a car, truck, motorcycle or other vehicle. Since these loans are secured, credit checks, employment verification and involved applications aren’t required. Many loans process within minutes. People can borrow the amount they need even if those amounts are small, and the default repayment period in Florida is just 30 days.

How does a title loan work?

You provide a lender your vehicle title in exchange for a principal amount. Your loan may have fees and interest charges, as allowed by Florida law. The initial repayment period is 30 days, but 30-day extensions are legal, and a lender must indicate up front if this option will be available to you. Although you use your title as collateral, you never relinquish control of the vehicle during the loan and can continue using it to get to work and so forth.

What is a 0-percent title loan?

The Florida Title Loan Act allows an interest rate of:

• 30 percent per annum on the first $2,000 of a principal amount
• 24 percent on any additional amount up to a $3,000 principal amount
• 18 percent on any borrowed amount beyond that

Zero percent title loans are title loans in which the lender has opted to waive its right to charge the interest outlined above. The title loan industry is competitive, and many lenders opt to do this in order to attract the most desirable clientele. There are two fundamental types of title loans that offer zero-percent interest: those with fees and those with conditions.

Zero Percent with Conditions

Some zero percent title loans have conditions. What this means is that the loan does have an interest rate but that those charges are waived while certain conditions are maintained. For instance, a lender may give you a $500 title loan for your car at 0 percent if that loan is repaid within the initial 30-day period, but if a 30-day extension—as allowed by Florida law—is required, then the interest rates increase to 30 percent.

When it comes to conditions, one point in particular to be aware of is whether any interest increases are retroactive. Consider an example. Florida allows licensed lenders to charge 30-percent interest on the first $2,000 of the principal amount. Let’s say you borrow $2,000, repay $1,000 within 30 days and require a 30-day extension. If the interest rate is retroactive, then you would pay 30-percent interest for the first month on the $1,000 already repaid.

Zero Percent with Fees

Another approach to zero percent title loans is a fee-based structure. In this configuration, the lender charges no interest on the money borrowed but charges an initial fee and an additional fee each 30-day period as required. There would of course be late fees as well, which apply to almost all title loans. An appealing aspect of this approach is that fees are flat and the consumer knows exactly what he or she owes. If you borrow $500 at $50 and need a 30-day extension, the loan will cost you $600 overall. It’s also worth noting that fees and conditions aren’t mutually exclusive and that some lenders will offer loans that have fees as well as conditional interest.

Consumer Protection

Florida has laws in place to protect consumers from deceptive and exploitive business practices. The state requires lenders to be licensed and to operate within certain parameters. Lenders cannot market themselves in certain manners and are limited in the interest and fees that they can charge. If a lender fails to meet these requirements, then the loan you agreed to will be null and void. Of course, it’s better than you enter any zero percent title loans with eyes wide open. If you have any uncertainties, then contact a consumer protection agency in Florida.