Illinois Car Loan Laws

The rate limit on Illinois dealer contracts

A retail installment contract from an Illinois dealer falls under the Motor Vehicle Retail Installment Sales Act, 815 ILCS 375. Section 21 says the finance charge may be no more than the maximum the Predatory Loan Prevention Act allows. That act, 815 ILCS 123, bars charges above 36% APR, figured with the broader military APR method that the federal Military Lending Act uses.

• Who is covered. The cap applies to dealers and to finance companies that buy their contracts.
• Who is not. Banks, savings institutions and credit unions chartered under state or federal law are exempt from the Predatory Loan Prevention Act.
• What it means for you. 36% is a legal ceiling, not a normal rate. Borrowers with fair or good credit usually pay far less, so test any offer in the car payment calculator.

Doc fees and taxes at an Illinois dealer

• Documentary fee cap. Section 11.1 set a base documentary fee of $300 starting January 1, 2020, adjusted each year by the change in the Consumer Price Index. Before 2020 the base was $150.
• Required notice. Your contract must carry or come with a notice, in capital letters, that a documentary fee is not required by law but may be charged to buyers.
• Advertised prices. The Attorney General notes that Illinois lets dealers leave the documentary fee out of an advertised price, so expect it to be added on top.
• Sales tax. The state rate is 6.25%, and local sales taxes are added in many places. Since January 1, 2022, the full value of a trade-in comes off the taxable price. In 2020 and 2021, credit above $10,000 was taxed.

Falling behind and repossession in Illinois

The installment sales act does not give you a notice and a period to catch up before the lender acts. It does stop the holder from speeding up your payments when you are not in default (Section 12). Once you default, Section 20 points to Article 9 of the Uniform Commercial Code, 810 ILCS 5, for repossession, sale and redemption.

1. 1 Repossession. The lender may take the car without a court order as long as it does not breach the peace.
2. 2 Title. After a repossession, the holder must also follow the Illinois Vehicle Code rules for transferring the title (Section 3-114).
3. 3 Notice before sale. The lender must notify you before it sells the car and, in a consumer deal, tell you whether you could owe a deficiency.
4. 4 Reinstatement if you have paid 30%. If, at the time of repossession, you have paid at least 30% of the deferred payment price or total of payments (down payment and trade-in count), the Vehicle Code gives you 21 days after a notice to reinstate by paying the overdue payments, late charges and repossession costs. You can use this once per contract (625 ILCS 5/3-114(f-7)). Because it depends on how much you have paid, we do not count Illinois as a right-to-cure state.
5. 5 Redemption and deficiency. Otherwise, you can redeem by paying the full secured debt plus costs before the sale. If the sale leaves a shortfall, you can be asked to pay it.

Our guides to falling behind on car payments and repossession cover what to do at each step.

Where to check a lender and complain

A company that buys car contracts from Illinois dealers needs a sales finance agency license, which the Department of Financial and Professional Regulation administers. The Attorney General and State's Attorneys can enforce the installment sales act. Before you sign, ask the dealer which company will hold the contract, and keep the contract, the documentary fee notice and every payment record together. Writing to the holder first gives it a chance to correct a billing error and leaves a record for any later complaint.

Questions people ask