How do Title Loans Work – The Complete Guide

Title loans can help you borrow money fast during a financial emergency. Use your vehicle’s title as collateral for quick access to cash, even with bad credit. Are they the right choice for you? Find out now!

Title loans use your vehicle’s value as collateral. If approved, you give your title to the lender, and they hold it while you keep driving your car and repaying the loan.

Title loans focus on your ability to repay (proof of income, such as pay stubs, disability pay, retirement or unemployment income) and your vehicle’s value. Your credit score is only one contributing factor, and bad credit is okay. Also, as long as you meet the terms of your loan, it won’t affect your credit score. 

However, remember that title loans have high interest rates and should only be used for emergencies. If you miss your payments, the lender may repossess the vehicle. Before you sign a car title loan agreement, the lender must tell you the loan’s total cost in writing so you can ensure you can afford it.

Let’s learn more below.

What Is a Car Title Loan and How Does It Work? 

A title loan, or auto equity loan, is a secured loan that uses your car’s equity as collateral. You give up your car’s title until you pay the loan off in full, but you keep the car and can drive it while making payments.  

Borrowers can typically get 25% – 50% of their vehicle’s value, up to $50,000, as long as they prove they can afford repayment. 

Here’s how they work.  

Qualifying and Eligibility Requirements 

Some applicants are surprised that they may be able to qualify even with bad credit, but they shouldn’t be! Car title loans are intended for bad credit score and bad credit history borrowers who needs funds fast, within 5 hours in some cases. While some requirements vary by lender, here is what you can expect: 

• Be at least 18 years of age 
• Your name must be on the title 
• Own the car without any liens 
• Provide proof of income 
• Provide vehicle photos  
• Vehicle must have enough equity 
• Proof of insurance (some states) 
• Character references (some states) 

The Title Loan Process 

If you’re ready to apply, follow these 4 quick and easy steps. 

1. Complete the lender’s application online or in store 

2. Provide the lender’s required documentation 

3. Review and sign the loan agreement 

4. Receive funds and start making payments on the loan 

Loan Amounts 

Auto equity loan amounts vary by state law and specific lender guidelines. In general, car title loan lenders offer 25% – 50% of an applicant’s vehicle value. Of course, some states regulate minimum and maximum loan amounts, so be sure to check with your lender and review your specific state’s guidelines.  

Costs 

It isn’t free borrowing a loan. Title loans are very expensive, charge fees, like origination or processing fees, plus interest. These vary depending on the lender and your state’s law, but some lenders can charge APRs up to 300%.

Repayment 

Title loans are short-term loans that range from 1 to 36 months. You make monthly payments that include principal and interest. Car title lenders may require payments 1 of 2 different ways. 

• Single-payment – The amount you borrowed plus interest due in one lump sum. 
• Installment loan – Fixed monthly payments for the term. 

Availability

Title loans are illegal in some states, while others have strict requirements. Car title loan lenders must follow each state’s specific laws.

How Much Will a Title Loan Cost Over Its Lifetime?

How much auto equity loans cost over their lifetime depends on many factors. These including:

• Loan length – The longer the loan term, the more interest you’ll pay, which increases your lifetime costs.
• Fees – Title lenders charge fees like processing, DMV lien transfer, and sometimes origination fees.
• Interest rate – The higher the interest rate, the higher the cost of the loan.

Title Loans Are Expensive – Title Loan Examples

The longer you pay on your auto equity loan, the more money you will end up paying. Our company doesn’t charge prepayment penalties. Therefore, if you have the funds to pay off your title loan early, we encourage you to do so! See how early prepayment can make a difference below.

Early Prepayment Can Make a Huge Difference

Examples	2018 Toyota Camry	2020 Chevrolet Equinox
Vehicle Value	$11,500.00	$17,200.00
Title loan Amount	$3,450.00	$7,500.00
Monthly Interest	6.00%	4.94%
APR	72.05%	59.33%
Loan Term	24 Mo.	36 Mo.
Fees	$90	$90
Monthly Payment Amount	$275.00	$450.00

*All our repayment plans are without any hidden fees or prepayment penalties.

Paying Off a Loan Ahead of Schedule Example – Save $2,000

If you own a 2018 Toyota Camry, and get a loan for $3,450, the loan would cost you $3,240 by the end of a 24 month term. 

$275 monthly payment x 24 months = $6,600

$6,600 – $3,450 loan amount = $3,150

$3,150 + ($75 + $15) fees = $3,240 If you came up with the remainder of the loan balance early, you can choose to pay it off early without penalty. In this case, the payoff balance after 6 months is $2,976 bringing your total loan cost to $1,266.65. That is almost $2,000 in savings!

Disclosure: Not all applications are approved. Approval is dependent upon specific underwriting criteria and the applicant’s ability to repay and credit history. Other restrictions may also apply.

Loan Requirements by State

Auto equity loan requirements vary by state, but most lenders require proof of vehicle ownership without any liens, a car with adequate value, proof you can repay the loan, and proof of residency. Some states also require proof of insurance and character references.

Online Title Loan Tips and Tricks

Consider these tips if you’re considering a car title loan:

• Compare lenders – Don’t settle for the first lender you find. Get quotes and read reviews from multiple title lenders to ensure you get the best deal and a reputable title lender.
• Use a car title loan calculator – A title loan calculator can help you see your monthly payment based on how much you borrow and the total interest costs for different loan terms.
• Pay early to save money – If your lender doesn’t have prepayment fees or penalties, pay off your loan early to save money on interest.
• Use a cosigner – If you don’t make enough to qualify for the loan, consider adding a cosigner to improve your approval odds.

How Title Loans Work?

Apply online and get preapproval answer in a matter of minutes. If your application and documents are reviewed and finalized by 2:00 PM your lender’s time, you may receive funds the same day!

The Process Is Similar to What We Mentioned Above

Here is what to expect:

1. Apply – Our fast and easy application process takes less than five minutes to complete and requires some personal and vehicle information.
2. Submit documentation – Pre-approved applicants can submit their documentation to the online portal. These include:
   • Proof of income – pay stubs, bank statements, severance pay, etc.
   • Proof of identity – Government-issued photo ID 
   • Vehicle photos – Interior, exterior, VIN
3. Sign and receive funds – Review the loan’s terms and sign the agreement. Funds are usually paid out within 1 business day of final approval.
4. Repay – Make payments according to your loan agreement. When the loan is paid off, We will return your vehicle’s title.

How Much Can You Get for a Title Loan?

In the broader title loan industry, lenders generally offer loan amounts up to 50% of your car’s value and up to $50,000. However, our company provides a bit more flexibility with loan amounts ranging from $500 to $50,000, or up to 70% of your vehicle’s value. The amount you can borrow to get fast cash depends on several factors, including the following:

• How much your car is worth
• If you own the car outright
• Ability to pay back the loan

Advantages and Disadvantages of Car Title Loans

Car Title Loan Advantages

• Receive funds fast
• All credit can apply
• 100% online application
• Continue driving your vehicle 

Car Title Loan Disadvantages

• Risk of repossession
• Can increase debt

Alternatives to Title Loans

Before you apply for online title loans, consider the available alternatives and consider exhausting these options before using your car as collateral.

Negotiate Your Current Debts

If you cannot get out of the cycle of debt and are looking for a solution, negotiate your current debts with your creditors. You might be surprised to learn how many are willing to work with you if you ask.

Friends or Family

Your friends or family may be willing to help you get back on your feet. With this option, you might avoid interest and fees, paying back only the amount you borrowed.

Credit Card

Credit cards are high-interest loans like auto equity loans. Depending on how much you need, you can charge the emergency on your credit card and pay it back in a lump sum or in installments each month.

Personal Loan

Personal loans are unsecured loans that often have stricter requirements than title loans. Banks and other private lenders offer personal loans, and while you might pay lower interest rates, you usually need good credit and a low debt-to-income ratio to qualify.

Public Assistance Programs

If your emergency concerns your basic living needs, public assistance programs like SNAP, WIC, or TANF may be available.

How Car Title Loans Work FAQs

The Bottom Line – When Should You Get a Title Loan?

Knowing how auto equity loans work can help you maximize your vehicle’s equity during an emergency and get a personal loan at the same day. However, It’s always best to exhaust all alternatives and carefully review lenders to ensure you choose the best option for your financial situation.

Car title loans should only be used when you have no other options or for an extreme emergency. The interest rates are high, so applying for a loan on your car’s title shouldn’t be taken lightly. If you have questions or need more information about our loan process, contact us to talk with a representative or visit our FAQs page. If you’ve decided that a car title loan is the best option for you, our service offers a fast and easy application process that provides quick responses. Our entirely online process can be completed in just a few hours. Once approved, you may receive your funds either on the same day or within one business day.