Title Pawns

Authored By: Legal Services Alabama


What are Title Pawns? Who uses Title Pawns? Why shouldn't I make a Title Pawn? Answers to these questions and more are in this document.

What are Title Pawns?

Title pawn dealers give you small loans if you sign over your car title. It may sound good. You get some money, and you get to keep driving your car. You also get some big problems.

Who uses Title Pawns?

People strapped for cash make title pawns. They think they can solve a short-term need for cash. Unfortunately, they usually have to renew the loans. They soon find themselves in a much deeper hole than when they first made the loan.

Why shouldn't I make a Title Pawn?

There are several reasons:

  • Lenders charge a big fee for title pawns. This fee is like paying interest of 300% on the loan. This comes to almost ten times as much as Alabama's Small Loan Act allows. Unfortunately, the Legislature says these are pawns, not loans. That means that the Small Loan Act limit does not apply.
  • Most people who make title pawns cannot pay them back on time. They often have to renew them. Then, they have to do it again. Each time, there is a new charge. As a result, they end up paying far more in fees than what they borrowed. They may still owe all they borrowed. This puts people in worse financial shape than when they started.
  • If you can't pay the title pawn when it is due, the title pawn lender can take your car and sell it. Even if your car is worth much more than you owe, you may end up with no car.

What if I have a Title Pawn now?

You should try to pay the debt right away. Then stay away from title pawns. Warn your friends and family of the problems with title pawns.

Reviewed August 2008

AlabamaLegalHelp.org offers legal information, not legal advice. We try hard to make sure this website accurately explains your rights and options. However, the site does not apply the law to your personal facts. For this sort of legal advice, you should call a lawyer. To apply for free legal services in Alabama, call the Legal Services Alabama office that is closest to where you live OR call toll-free 1-866-456-4995. You can also apply online at intake.alsp.org.

Last Review and Update: Aug 20, 2008
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