What are title loans?
Title loans are a form of short-term, secured loan where the borrower is required to put up a lien-free vehicle title as a form of collateral to qualify. Title loans are very easy to qualify for as the borrower’s credit history has zero effect on whether or not they will be approved. The title loan lender is primarily concerned with the collateral vehicle’s value and will issue a loan based off that amount. If the loan is not repaid with the allotted time frame, the borrower’s vehicle may be seized to cover the remaining amount.
Types of Title Loans
Contrary to popular belief, there is more than one type of title loan.
Car: The standard and most common type of title loan.
Motorcycle: A borrower may use a motorcycle title in place of a car title.
Title Pawn: This is the same thing as a title loan, just by a different name. Some states say title loan while others say title pawn.
How does a title loan work?
A title loan operates off of the borrower putting the title for a lien free vehicle up for collateral. How much they get approved for will be based upon the value of said vehicle. What this means is that a borrower will apply for a title loan and the lender will send an appraiser to get a fair price for the vehicle in question. After receiving that information, and verifying that the borrower has a free & clear title, they’ll approve the borrower for a specific amount and offer them a loan. If the borrower agrees, they’ll keep the keys to their vehicle and continue to drive it, but hand over the title to the lender in case they don’t make their payments.
General Title Loan Requirements
For you to qualify for a title loan, you need to make sure you have a few thing handy first. While all title loan providers may not require this whole list, it would be wise to know where each piece of information or item is in case you need it.
- A lien free vehicle
- Title to said vehicle
- Valid photo ID
- Spare set of keys
- Proof of roadside assistance plan
Title Loan Pros
Easy Approval: With the primary qualifying factor being your lien free vehicle’s value, being approved for a title loan is incredibly simple and straightforward. Your credit rating and history will barely affect your ability to qualify and you can get a title loan even if you have bad credit.
Quick Cash: Title loan providers have made the process incredibly fast so you can have your cash in hand in less than 1 business day after being approved.
Title Loan Cons
High Interest Rates: TItle loans are very similar to payday loans and it isn’t uncommon to see interest rates in the 300% - 400% ranges. This makes paying off a title loan very difficult and expensive.
Short Terms: The larger amount you’re approved for, the harder it is to pay back in a short time frame. Chances are if you’re taking out a loan, you don’t have the money to pay it back right away.
Can Lose Your Car: Forfeiting ownership of your car is a possibility when you take out a title loan. All it takes is one missed payment or an unplanned emergency after you’ve put your title up for collateral and you’ve lost it.
Where can I get a title loan?
We regularly review loan providers and you can find them on our title loan providers page.
Title Loan FAQ
What if I have bad credit? Can I still get a car title loan?
Yes. While your credit score is checked, it is a minor point in the approval process. Your vehicle’s value weighs far more heavily into that decision.
What is a lien free car title?
A lien free car title is just a fancy way of saying a paid off car title. You, the borrower, would be the lien holder and not a bank, credit union, or other financial institution.
Can title loans be refinanced?
Most lenders do offer title loan refinancing to get you a better deal and many even offer refinancing on loans that weren’t issued by them as well. This lets you shop around for the best refinancing offer and use it as a bargaining tactic to get the best title loan possible.
Does the auto title have to be in my name?
Yes. The title must be in the name of the individual taking out the title loan.
Why should I get a title loan instead of a different loan type?
You really shouldn’t. Title loans don’t offer anything different than a personal or signature loan and they usually have shorter terms and higher interest rates while having your car / motorcycle title as collateral. This means that the loans cost more and are harder to pay off with the risk of you losing your mode of transportation.
Are title loans available near me?
You have a 50/50 shot of that since title loans aren’t allowed to operate in 25 states across the US. If they are available near you, read the fine print. The states that do allow title loans typically have very lax regulation on them and rely on the title loan providers to manage themselves.
Do many borrowers lose their vehicle?
About 1 in 5, just shy of 20%.
What is the average title loan amount?
Between $700 - $900. However, title loans can be issued in excess of $10,000.
What is the typical length of a title loan?
About 30 days.
How can title loans be used?
Title loans can be used however you want. Once they money has been deposited, it’s your to do with how your wish.