What Is a Title Loan?

If you’re in need of fast cash and own a vehicle, you might explore title loans. This is particularly true if you have no credit or bad credit. With a title loan, you can easily cover a variety of emergency or short-term expenses. Here’s everything you need to know about title loans and how they work.

What Are Title Loans?

Also known as pink-slip loans, title pledges, and title pawns, title loans are secured loans that let you use your vehicle title as collateral. Since title loans are tied to your car, the lender can repossess it if you fail to make your payments.

In most cases, title loans are short-term, high-interset loans with lenient requirements. You can get approved for one, even if you don’t have the best credit. While title loans vary from lender to lender, most of them start at $100 and offer repayment periods of 15 to 30 days.

How Do Title Loans Work?

As long as you own a vehicle, you may apply for a title loan through an online or traditional lender. Once you do so, the lender will ask to see your vehicle, car title, and driver’s license. Upon approval, you’ll hand over your car title and receive the funds, which will be based on how much you request and the value of your vehicle.

Generally speaking, you’ll have to repay what you borrow plus any interest and fees within a period of 15 to 30 days. Fortunately, you may continue to drive your car as you make your payments. Keep in mind that if you default on your loan, the lender may repossess your vehicle and make it difficult for you to get to work, school, and anywhere else you need to go to.

Are Car Title Loans Legal?

Due to their predatory nature and high cost, title loans are illegal in many states. The states that do permit title loans,^[1] however, include:

Alabama
Arizona
California
Delaware
Florida
Georgia
Idaho
Illinois
Louisiana
Mississippi
Missouri
Nevada
New Hampshire
New Mexico
Oklahoma
Ohio
South Carolina
Tennessee
Texas
Utah
Virginia
Wisconsin

If you live in a state other than the ones mentioned above, you won’t be able to take out a title loan.

When Should You Take out a Title Loan?

The Consumer Financial Protection Bureau (CFPB) found that 20% of car title loan borrowers can’t repay their loans.^[2] As a result, lenders repossess their vehicles. For this reason, you should only consider a title loan as a last resort.

Do your best to avoid one unless you’re strapped for cash and exhausted all other options, like personal loans from online lenders, credit cards, payday alternative loans from credit unions, and borrowing money from friends and family. These alternatives can be more affordable and help you avoid losing your vehicle.

Also, note that a title loan is a short-term financing option. If you find that you’re always in need of one, it’s a good idea to evaluate your financial situation and determine how you can save money and/or increase your income.

What Are the Pros and Cons of Title Loans?

Just like all financial products, title loans come with benefits and drawbacks you should be aware of, including:

Pros:

No credit check: Most title loans don’t require a credit check. This is a huge plus if you have no credit or bad credit and can’t qualify for traditional financing options, like personal loans and credit cards.
Fast cash: You won’t have to wait long to receive your funds. Once you’re approved for a title loan, you can expect them immediately or within a few days.
Can continue to drive your car: The lender won’t take your car after you get your loan. You may drive your vehicle to get from point A to point B as you make your repayments.

Cons:

High interest rates: Title loans are not cheap. In fact, their sky-high interest rates and exorbitant fees can easily steer you into a cycle of debt.
Quick repayments: Typically, you’ll have to pay back your title loan in 15 to 30 days. This might not be enough time, depending on your situation.
May lose your vehicle: With a title loan, you put your car on the line. If you default on your loan, the lender can repossess it and leave you without transportation.

How Much Can I Borrow With a Title Loan?

Loan amounts for title loans depend on the state and lender. In general, however, you may borrow anywhere from $100 to $10,000. Most lenders will approve you for between 25% to 50% of your vehicle’s value. This means that the more your car is worth, the larger loan you may get approved for. The average loan amount for a title loan is $1,000.

How Much Do Title Loans Cost?

If you take out a title loan, you’ll likely pay around 25% of the loan amount per month.^[3] This translates into an annual percentage rate or APR of more than 300%, which is much higher than the APRs you’d get with most personal loans and credit cards.

Imagine you need to borrow $2,000 to pay for an unexpected car repair. A lender offers you a title loan with a 25% finance fee and 30 day repayment period. This means you’ll have to pay an extra $500 to borrow $2,000.

In the event you move forward with the loan, you’ll give the lender your car title and receive $2,000. By the time the 30 days are up, you’ll have to pay $2,500 plus any additional fees. As you can see, a title loan doesn’t come cheap.

To find out how much a title loan might cost you, check out our handy title loan calculator. Simply input the loan method (fixed installment or equal principal and equal interest), loan amount in dollars, loan term in months or years, and annual interest rate, expressed as a percentage. Then, the calculator will inform you of your monthly payment as well as the total principal and total interest you’ll pay.

Title Loan Calculator

Figure out how much you should pay for a title loan.

Monthly Payment

$860.66

Total Principal Paid:$10,000.00
Total Interest Paid:$327.97
Loan term:12 months

Show amortization schedule

What Are the Eligibility Criteria for a Title Loan?

Fortunately, it’s easy to get approved for a title loan. To do so, you’ll need to meet the following criteria:

Be at least 18 years old
Have an active and valid banks account
Have a clear vehicle title or tile with at least some positive equity
Show proof of income or benefits payments
Live in a state where title loans are legal

What Documents Are Needed for a Car Title Loan?

If you’d like to secure a title loan, you’ll need to share certain paperwork with a lender, such as your:

Vehicle title
Government-issued ID like a driver’s license or passport
Proof of residency, such as a utility bill
Up-to-date vehicle registration
Proof of vehicle insurance
Contact information of at least two references
Copies of the keys to your vehicle

Some lenders may also ask you to install a GPS tracking device to your vehicle. This way they’ll be able to quickly locate your car and repossess it if you default on your loan. Check the lender’s website or reach out to them directly for more information on their specific requirements.

How Do I Apply for Car Title Loans Online?

You can apply for a car title loan online, from the comfort of your own home or office. Be prepared to complete a simple application with details about yourself and your vehicle. Once you’re pre-approved, the lender will notify you.

From there, you’ll need to visit them in person and bring your required documents. They’ll be able to appraise your vehicle and give you the cash you need either on the spot or within a few days. You can drive away and repay your loan as you agreed to do so in your agreement.

Can I Find Title Loans Near Me?

As long as you live in a state where title loans are legal, you should be able to find at least a few lenders that offer them. Our robust lender-finding search engine below can come in handy if you want to locate a title loan in your area.

Find Title Loans Stores Near Me

Use My Location

What Information Should I Look for If I Apply for Title Loan?

Not all title loans are created equal. While some are legitimate, others are predatory. That’s why it’s important to look for loans that clearly disclose their cost. You should know the finance charge in a dollar amount and the APR in percentage form. Plus the lender must reveal how long you have to borrow the money as well as any additional fees, like late fees or returned check fees.

Before you commit to a title loan, shop around. Compare the APRs, terms, and fees of all your options. This can help you hone in on the best title loan for your unique situation.

Don’t forget to check with your state attorney general or state regulator about title lending laws in your state. Some states that allow title loans impose strict regulations on them.

How Do I Repay My Title Loans?

While each lender has their own repayment policies, most will let you make your payments in-person, via phone, or online through automatic withdrawals from your bank account.

To set up automatic withdrawals, you’ll need to provide the lender with your bank account number and routing number. Then, they’ll debit the money out of your account electronically each time it’s due.

Keep in mind that some lenders will charge you late fees for repaying your loan past the deadline so it’s important to make all your payments on time.

If I Do Not Repay, Will My Car Be Repossessed?

If you fail to repay your loan on time, the lender will have the legal right to repossess your vehicle.^[4] This will allow them to sell it and recoup some or all of their money. Depending on where you live, you may have to pay the difference between the sale price and the loan amount.

A vehicle repossession can make it difficult for you to get around, especially if you rely on your car on a regular basis and live in a city with limited public transportation options. Therefore, you should refrain from a title loan unless you’re confident you can pay it back.

Is It Possible To Rollover A Title Loan?

In a perfect world, you’d be able to pay your title loan when it’s due. But if you can’t, most lenders will extend the due date for another two or four weeks and charge you a fee. This process is called “rollover.”

Unfortunately, rolling over your total loan will tack on more interest and fees, making your debt even more expensive. If you find yourself in a situation with multiple rollovers, you may fall into a cycle of debt that can eventually cost you your vehicle. Ideally, you’d avoid rollovers in the first place.

Can I Get an Online Title Loan With No Credit Check?

You can get a title loan online without a credit check. That’s because most lenders that offer title loans don’t focus on credit scores. Instead, they want to make sure you have a vehicle title, valid driver’s license, and proof of insurance. If you have no credit or bad credit, this is great news as you can lock in the financing you need and might not be able to find elsewhere.

What if Someone Else’s Name Is on the Title With Mine?

If your car title has someone else’s name on it, don’t worry. You may still get a car title loan. In the event there are two names and the word “OR” separating them, both you and the other person are free to get a title loan without the other’s approval. If there is an “AND” that separates the two names, both of you must agree to the loan. Check your car title to determine which situation applies to you.

Can I Get a Loan on a Car That’s Not Paid Off?

Contrary to popular belief, a title loan may be an option, even if you haven’t paid off your car. Some lenders will approve you if you’re still making payments on your vehicle. The caveat, however, is that you must have positive equity in it. This means the current value of your car exceeds the current remaining balance of your auto loan. If you’re unsure of whether you must own your car free and clear, don’t hesitate to reach out to the lender for clarity.

How Does a Title Loan Affect My Credit?

In general, a title loan won’t have any impact on your credit scores. Since most lenders will ignore your credit and stay away from a hard credit pull when you apply, there’s no need to worry about any negative effects.

On the other hand, lenders don’t usually report on-time payments to the credit bureaus so you can’t use a title loan to build or improve your credit. If your goal is to increase your credit score, you’ll have to explore alternative lending options, like personal loans and credit cards.

Can I Get Title Loans As Military Personnel?

It’s not uncommon for car title lenders as well as other predatory lenders to market their products to military service members. If you’re part of the military community, rest assured you’ll be protected as a result of the Military Lending Act (MLA).^[5]

Per the MLA, a car title lender can’t charge you an APR of 36% or higher, access your bank account, or ask you to pay your loan by check. In addition, they must be upfront about all loan terms and costs.