Key Takeaways

  • Most banks and credit unions don’t offer car title loans, only personal loans
  • You can apply for auto title loans with online title loan lenders in a few minutes
  • Verifiable income for a title loan includes pension, retirement, and unemployment
  • Title loans typically have high-interest rates and should be for emergencies only

Banks and credit unions typically don’t offer car title loans. Instead, you must use independent title loan lenders to apply for these fast cash loans. Title loans typically have higher interest rates than traditional bank loans, but most title loan lenders don’t rely on credit scores to qualify you for the loan. Banks, however, look at credit scores before deciding whether an applicant can borrow money. Depending on the lender, you may borrow $500 to $50,000 if you qualify. 

What are Car Title Loans?

A car title loan is a loan for people needing emergency funds. It is a short-term loan, usually repaid within a few months or years, and is often known as a payday alternative loan.

The car’s title is the collateral. The lender takes possession of the vehicle title while you make payments. The loan amount borrowers can apply on car title loans is usually between 25% – 50% of the vehicle’s value. However, your qualifying factors determine how much a title loan lender will lend. To qualify lenders focus on your ability to repay the loan and the vehicle’s value, rather than only focusing on your credit scores.

How do Title Loans Work?

You can apply for auto title loans with online lenders offering title loans. The application usually only takes a few minutes, and you should have an answer regarding loan approval within a few minutes. After selecting the offer, upload your qualifying documents to the lender and submit your title. Title loan lenders can fund car title loans usually within one to two business days.

When you take out a car title loan, you keep your car and receive the loan proceeds in one lump sum. You make monthly payments, including principal and interest, based on the borrowed amount. You’ll receive your title back once you repay the loan in full. However, it isn’t until you repay the loan that you can transfer or sell your vehicle.

Keep in mind that if you miss even one payment, the lender may have the right to repossess the vehicle. It’s important to only borrow what you know you can repay to avoid the risk of losing your car.

How do you Qualify for Title Loans?

Qualifying for vehicle title loans is easier than personal loans because title loan lenders typically don’t focus on your credit score like banks and credit unions do. Most lenders do a credit check but don’t have a minimum credit score threshold required to qualify for a car title loan like banks require when you apply for a personal loan. This means you may still qualify with low credit scores.

Instead, you must prove the following to qualify:

Verifiable Income

You must prove you have income for a car title loan, but it doesn’t just have to be employment. Unlike bank loans, title loans often allow other income, such as disability, worker’s compensation, retirement, or passive income. It must be a consistent source that ensures you can afford the loan payments.

Own a Vehicle Free from Liens

You must own your car outright. This means you don’t have any auto loans on it. Your name must also be on the title as the owner. The vehicle must have enough value to support your loan and leave some of its value untouched to qualify for an auto title loan.

Have a Government-Issued ID

You must have a current government-issued ID to apply for a title loan. Most lenders accept a driver’s license, state ID, or passport.

Have Proof of Residency

Each state has different laws and regulations regarding title loans. To qualify, you must prove you are a resident of the state in which you’re applying for the title loan.

What are the Advantages of Title Loans?

Auto title loans have some clear advantages. Here’s what to consider when deciding if you should use your vehicle as collateral.

  • You can receive funds fast: You may get funds as soon as the same day you apply
  • Bad credit won’t prevent approval: Focus is on the collateral and your income
  • Easy application process: The online application takes only a few minutes to complete
  • You keep your car: You get to drive your car like normal, while making payments on the loan

What are the Disadvantages of Title Loans?

It’s important to understand the disadvantages of car title loans to ensure they are the right choice when you need to borrow money.


Do Title Loans Hurt Your Credit?

Title loan lenders typically don’t report title loans to the credit bureaus. It doesn’t hurt your credit to apply for one or borrow the money. However, if you miss your payments and the lender must send your account to a collections agency, they will likely report the collection on your credit report. This type of account on your credit report can hurt your credit score.

What is a Collateral Loan in Banking?

A collateral loan is a loan for which you exchange or pledge an asset as security. For example, an auto loan uses your car as collateral. The lender holds the title, and if you miss your payments, they can repossess the vehicle.

Why are Title Loans so Expensive?

Title loans have high interest and fees because of the risk title loan lenders take. They don’t focus on credit scores or require borrowers to be employed. Title loans are meant to be a last resort when you can’t satisfy your emergency need for funds with any other method.

Final Thoughts

You won’t find car title loans at a bank or credit union, but you can find them at reputable title loan lenders. This can be good news if you have low credit scores or don’t meet the other strict qualifying requirements that banks require. However, title loans should only be used for extreme emergencies and after you’ve exhausted all other methods to secure the funds.

If you have questions about car title loans and how they work or are ready to apply for one, contact us today at 1-888-700-8900 and speak to a representative.

Written by Samantha Hawrylack

Written by

Samantha Hawrylack

Samantha Hawrylack writes for our company and is an expert in personal finance. Sam received her Bachelors of Science in Finance and her Masters in Business Administration from West Chester University of Pennsylvania. She began her career in the financial services industry and shifted to an entrepreneurial role where she could directly impact clients. Sam has an impressive background in personal finance and business management.