Facing a financial emergency and need instant funding?

A car title loan is a secured loan, allowing you to use your vehicle’s title as collateral to get instant cash. However, if your car’s title isn’t solely in your name or if you still have outstanding loans on your car, getting approved for a title loan can be a challenge.

That’s where a second lien title loan may be an option.

Most lenders prefer borrowers that own their cars without loans. But some may allow second lien title loans or loans on cars with auto loans. This gives borrowers more flexibility when they need funds fast.

What Is the Difference Between a First and Second Lien?

When you borrow money from your car, a lien is placed on it. The lien gives the lender rights to your vehicle. If you don’t make your payments as agreed in the loan terms you could lose your car. 

When you buy a vehicle with a car loan, the lender has a right to it until you pay the loan in full. If you don’t make your payments, the lienholder can take your vehicle and sell it for the proceeds.

A second lienholder also has a stake in your car’s value, but they come second in line. This means the first lender gets paid back first should you default on the loan. The second lienholder only gets paid if there are any funds left after repaying the first lender.

What Are Second Lien Title Loans?

Definition: Second lien title loans are loans against your car title that already has a lien, such as an auto loan or another title loan.

Payment Position: The second lien title loan takes the second lien position. This means the title lender receives payment second if the first lienholder must liquidate your collateral if you didn’t make your payments. The first lienholder receives repayment first.

The first lienholder can be the original auto lender you used to purchase the car or a car title loan lender you used to borrow from your vehicle’s equity.

Title Possession: The primary lender has possession of the title until you pay the loan in full, which is why it can be hard to find a title loan company offering a second-lien title loan.

Legal Differences: Each state has different laws regarding title loans; some don’t allow a second title loan on one vehicle.

How Do Second Lien Title Loans Work?

Second-lien title loans are secondary loans on a vehicle’s title. Your loan amount depends on the vehicle’s value and how much you’ve paid off on the first loan. 

Most lenders allow vehicle owners to borrow up to 50% of the car’s equity, which includes the amount borrowed with the first loan. This means you will probably receive a much lower amount of money than what you received on your original loan.

When applying for second lien title loans, the process is similar as first-lien title loans. The primary difference is that the both lenders must talk and the new lender must receive permission to place a second lien.

This means you must complete a loan application and provide the lender with documentation to prove you qualify. This includes the following:

  • A valid government-issued ID to prove your identity
  • Proof of income with paystubs and W-2s
  • Proof of assets, if the lender requires them
  • Information about your car and its current liens

Is Second Lien Debt Secured?

First-lien and second-lien title loans are similar in that they are both secured by the vehicle’s equity. The difference is that the first lienholder has priority over the vehicle and its proceeds if you default on your loan. Second lienholders get whatever is left, if anything.

How Second Lienholders Determine Your Loan Amount

Lenders determine the vehicle’s total value and derive your loan amount from the value after evaluating your income and ability to repay the loan, along with the outstanding loan amount on your first lien. 

How Second Lienholders Deal With the Risk

The risk second title loan lenders take is they are only paid after the first title loan lender’s debt is satisfied in the case of default. 

To make up for the risk, second lienholders typically charge higher interest rates and fees. This compensates them for the risk of walking away with nothing if you default on the loan and the first lienholder stakes a claim to the available funds.

Requirements for Getting Second Lien Title Loans

The requirements for getting a second lien title loan are similar to that of the first title loan, with the exception of requiring the first lienholder permission to place a second lien on the vehicle. The requirements include:

  • Be at least 18 years old and registered owner
  • Own a qualifying vehicle worth enough to borrow from it.
  • Provide proof of income, such as paystubs or W-2s.
  • Provide contact information for the primary lienholder.

How to Apply for Second Lien Title Loans Online

The application process for a second title loan on the same car is similar to that you went through to get your current title loan, including:

  1. Fill out an application: Some title loan lenders offer a title loan application online, and other lenders require you to visit their store in person. Complete the application with all applicable information to see if you are approved.
  2. Provide the required documents: You must provide proof of your ability to repay the loan and information about the vehicle’s current title loan or auto loan for the lender to get information about the title and determine eligibility.
  3. Determine your approval status: It can take longer to get a second lien loan approval than the first lien since you don’t have a clear title, and lenders must speak to the existing lender to obtain permission to place a second lien.

What Are the Risks Associated With Second Lien Title Loans?

Borrowing too much money is risky. If you already have a lien on your vehicle, borrowing even more money puts you further into debt. If you can’t keep up with the payments, there are serious consequences, such as:

  • Losing your car.
  • Damaging your credit score.
  • Putting yourself in an endless cycle of debt.

What Alternatives Are There To Second Lien Title Loans Online?

When you need fast cash, title loans seem like the answer. They fund fast, and you may get approved even if you have a bad credit score. However, there are alternatives to consider before taking on a second lienholder.

  • Borrow from friends or family: When you need cash fast, you may be able to ask someone close to you for a loan. It depends on how much cash you need and what terms you’re willing to offer, but you don’t have to worry about losing your car when you borrow from someone close to you.
  • Personal loan: If you don’t want a loan with a lien, you can try a personal loan. These loans require good credit, but you don’t have to put up collateral, so you don’t have to worry about losing your car. However, personal loans for borrowers with bad credit have higher interest rates than personal loans for borrowers with good credit.
  • Refinance your existing loan: Depending on the current market value of your car, you may be able to refinance your existing loan, whether a car title loan or regular car loan, for more money, getting the difference between the loan amount and your payoff as cash.


Can I Apply for a Second Lien Title Loan Online With Bad Credit?

Yes you can apply for a second lien title loan online with bad credit. Many title lenders don’t don’t go only by your credit score. While they do a credit check, many lenders allow title loans with bad credit.

Many of them focus primarily on your ability to repay, aka your income, and the vehicle’s value. With a second title loan, lenders must also determine how much equity is left after considering the outstanding loan amount on your first lien.

What’s the Maximum Loan Amount I Can Get With a Second Lien Title Loan?

The maximum loan amount lenders allow varies by state law, vehicle value, and the amount of outstanding loans on the vehicle. Typically, title loan lenders allow up to 50% of the vehicle’s value, including all liens.

For example, if your car is worth $10,000, you may be eligible for title loans up to $5,000.

How Do I Find a Reputable Online Lender for Second Lien Title Loans?

Researching and reviewing title loan lenders is the key to finding a reputable online lender for second-lien title loans. Check the company’s ratings with the Better Business Bureau and ensure they are properly licensed with the state’s financial regulatory agency.

What Happens if I Default on a Second Lien Title Loan With an Existing Lien?

Second lien holders are in a disadvantaged position because they only get paid after the first lien is satisfied if you don’t make your payments. This means the first lienholder gets paid in full first. If there are any remaining funds, the second lienholder may receive payment.

How Long Does the Online Application Process for Second Lien Title Loans Usually Take?

The process for second lien title loans is quick. Assuming you have all the required documentation, it can be as fast as a first lien title loan. Once approved, you can get your money on the same business day or the day after.

Are You Ready to Apply for Second Lien Title Loans?

Second-lien title loans can provide you with access to fast cash, but they are a little more complicated to get.

Not all states allow second-lien title loans and most lenders will not take the additional risk of financing a second title loan. This leaves you with the option to refinance your existing title loan to get more money or explore other financing options.

We are here to assist you whether you decide to refinance your existing title loan or obtain a second lien loan. Montana Capital Car Title Loans may help you with a fast online application and funding in as little as 24 hours in some cases.

Complete an application to determine which loan option is best suited for your needs. Explore the assistance available for your financial emergency, but always exhaust all other options first.

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.