South Carolina Title Loans – The Laws Regulating Title Loans in South Carolina

April 21, 2012 by  Filed under: Loans 

South Carolina has instituted several laws to protect borrowers from outrageous title pawn rates. In fact, South Carolina does not allow title pawns, but title loans are considered an approved financial product. According to South Carolina Code 37-3-413, these vehicle-secured loans are allowable within the state, but must be conducted according to specific guidelines.

Loan Renewals

A South Carolina short-term title loan can be for a term of at least one month and can be renewed for up to six additional periods. The term of these loans, as well as the optional renewal periods, seem suspiciously similar to a title pawn. However, unlike title pawns in other states, loan renewals do not entitle lenders to change the terms of the loan, except for a reduction in principal.

This means that if a borrower’s loan is renewed, then the lender cannot increase the interest rate or add accrued interest to the principal of the loan. The borrower can continue to repay the loan for an additional time period, without being penalized by an increased interest rate. In addition, lenders can not add fees to the loan renewal. Lenders often charge loan origination fees, or other fees to make the loan more profitable, however, in South Carolina, this type of mark-up is not allowed. The only fee allowable for a title loan renewal is the lien recording fee, which must be the exact amount of the government’s charge.

Disclosure Notice

South Carolina also requires lenders to provide borrowers with an important notice. This notice ensures borrowers understand they are entering into a high interest loan and encourages them to seek financial assistance elsewhere, if possible. It also warns them of the full ramifications of defaulting on their loan. During the loan process, borrowers are required to sign a disclosure notice with the following warning:

“This is a higher interest loan. You should go to another source if you have the ability to borrow at a lower rate of interest. You are placing your vehicle at risk if you default on this loan.”

Right of Rescission

Some would say that South Carolina has erred on the side of caution in the development of their title loan laws. Because, in addition to the disclosure notice, borrowers are given the right of rescission. This means they can cancel the loan up until the close of business the day after their original loan was signed. Of course, they must refund the full principal amount of the loan, but they are not required to pay interest or any other fees to the lender. This is a safeguard for the borrower with buyer’s remorse and may be an out-clause of which many remorseful borrowers are not aware.

Consumer Loans and Title Loan Refinance in South Carolina

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