Car Title Loan Laws in Arizona

When you need emergency cash, one option you have to get a quick loan is a car title loan if you have a valid title that shows you own a car, truck, motorcycle, or RV. This type of loan is made against the equity of the vehicle. As long as you make your payments on time, you can continue to use your vehicle as you normally would.

The auto title loan industry is regulated by state and federal laws. These types of loans are perfectly legal in Arizona, and the state agency that licenses auto title loan companies is the Department of Financial Institutions. In the state statutes, auto title loan companies are referred to as “secondary motor finance companies.”

Interest on Auto Title Loans in Arizona
The state protects consumers by limiting the amount of interest that a company can charge on an auto title loan per 44-291(G) ARS. For vehicle loans that are $500 or less, the monthly finance rate cannot exceed 17%. The finance rate cannot exceed 15% for vehicle loans between $500 and $2,500, 13% for loans between $2,500 and $5,000, and 10% for any auto loan over $5,000.

Contract for Arizona Vehicle Loans
Per 44-287 ARS, your contract for an auto title loan needs to include the name of the buyer and seller as well as a description of the vehicle. You must also be provided with the annual or monthly financing rate in a clear manner, so if you’re confused, don’t be afraid to ask! It’s your right.

Under 44-290 ARS, you may also request that the lender provide you with a written statement that outlines the due dates and amounts for payments that are required. You also have the right to receive a written receipt for any cash payments, which can be good to hold on to in case of a discrepancy in the records.

Default and Seize on an Arizona Car Title Loan
When you default on a car title loan, you can often work out a deal to extend the loan with the borrower. However, under the law, the creditor has the right to seize the vehicle.

So what qualifies as default? This means you failed to make a payment or did not pay the correct amount. Additionally, for some loans, you may be in default if you failed to maintain car insurance or meet another requirement as stipulated in the contract you originally signed. This is why it’s important to read the contract thoroughly to make sure you understand the requirements and don’t be afraid to ask questions. A reputable company will have no problem answering any questions or concerns.

If the unfortunate circumstances arise that the creditor needs to repossess your car, they must not “breach the peace” when they do per Arizona law. This does not mean that they have to give you notice before they repossess the car, although they do need to get a court order. Without this court order, you do not need to surrender the car, so you can always ask to be shown proof. Additionally, by law in Phoenix, the lender cannot hold onto the keys for your vehicle while the loan is being repaid.

Once the car has been repossessed from you, the auto title loan company has the right to sell your car in a public or private sale in a “commercially reasonable manner” (according to current market standards). Once it is sold, the money is used to pay back the remaining balance on the car title loan as well as any expenses that the auto title loan company incurred to repossess and sell the car. You will be provided with a notice of sale for the vehicle.

Often, you will be given the opportunity to buy the car back after paying back the money you owe, as well as any expenses that the auto title loan company incurred while repossessing the car.

Seek Further Assistance for Questions about an Auto Title Loan
You can learn more about the main federal regulations that auto title companies must follow here:
Regulation Z of the Truth in Lending Act

If you have any specific questions about an auto loan title company, such as confirming they have a valid, active license to run their business, you can contact the department directly:

Arizona Department of Financial Institutions
2910 N. 44th St. Suite 310
Phoenix, AZ 85018
Phone: (602) 771-2800
Fax: (602) 381-1225
consumeraffairs@azdfi.gov