Everything You Need to Know About Car Title Loans

Everything You Need to Know About Car Title Loans

If someone needs cash fast, they will often try to work some overtime hours, ask their friends and family for help, or apply for a payday loan. However, for any consumers out there who own a car, there is another method at your disposal.

A car title loan is a good way to gain access to cash relatively quickly, but there are also some inherent risks involved. If you are unfamiliar with what a car title loan is or how they work, you are in the right place. In this article, we’ll talk about everything you need to know about car title loans.

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What is a Car Title Loan?

A car title loan is when a person’s vehicle is put up as collateral in order for the loan to be approved. Loans of this variety can last for as long or as short as you like, and they require that you must own the car outright. If the loan isn’t repaid on time, the lender can legally take possession of your vehicle and sell it to get the loan amount back.

How Does a Car Title Loan Work?

They work similar to any other secured loan, wherein you will offer up your vehicle as collateral in case you are not able to pay back your loan. The amount that you are able to borrow will be based directly on how much your vehicle is worth. Normally, a lender will be comfortable giving you about 25-50% of what the car is actually worth. This is to ensure they can sell it quickly to recoup the loan amount if you default on the loan.

Trying to decide between leasing a car or buying it? Read this first.

Like any standard loan, the interest rate you’re given will depend on a lot of different factors. However, because you have put up your car as collateral, there is a good chance you might get a lower rate.

Pros and Cons of a Car Title Loan

While the choice is ultimately up to you and will depend on your unique financial and personal needs, we’ll provide a couple of pros and cons to help make your decision as easy as possible.


  • Car title loans are typically cheaper than other short-term loans, like payday loans. This is likely because of the fact that you have some sort of collateral present.
  • Your credit doesn’t need to be spectacular, as you are putting up collateral. So, the lender isn’t negatively affected as much if you default on your loan.
  • You will be able to use the borrowed money for anything you need it for. Whether you have an emergency expense, need to pay off medical bills or want a new TV, a car title loan can help you in a number of different ways.


  • The loan you will be able to secure will depend on the value of your vehicle. So someone with an older or more damaged vehicle will not be able to get as large of a loan as someone with a newer vehicle in pristine condition.
  • Of course, one of the biggest drawbacks to any car title loan is the fact that you are at risk of losing your vehicle. Losing your car by not keeping up on your payments can often lead to even more financial issues, so you always need to know what you are getting into before agreeing to anything.

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How to Choose the Right Car Title Loan?

As with every loan that you get, you need to put in some thought and research before signing on the dotted line. Each lender and loan will have different terms and conditions, and you need to ensure you only take on a loan that is right for you.

You need to shop around with various lenders and compare the different types of car title loans. Some will have different interest rates and fees, different lenders will offer you different amounts and some will be more flexible in terms of payments. It is up to you to decide what features are most important to you and which ones you won’t really benefit from. The “right” loan might be different for you than it is for your neighbor.

Title Loan Requirements

After reading this article and learning all about car title loans, you might be thinking they are the right option for you. If so, there are a couple of requirements you need to ensure you can qualify. Of course, first and foremost, you will need to provide the lender with personal information such as your name, address and phone number.

From then, you will need to provide the information of your car, such as the make, model, year and mileage. This will help the lender to accurately value the vehicle and determine how large of a loan they will provide.

Next, you will need to provide your employment information and show them proof of your insurance coverage. Once all of those requirements have been checked off, you should be all set to get your car title loan.

Having trouble choosing the right type of financing for your next car? Check out this infographic.

Final Thoughts

Car title loans can be a great option for many consumers. They typically don’t require a credit check and can allow borrowers to gain access to the financing they need. While they are a valuable financial tool, title loans are not without risk, which is why you need to carefully consider all your options before you make any final decisions.

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