Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Nov 2, 2012

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Yes, borrowers can obtain a title loan through a bank or other financial institutions. Typically, people in need of quick cash but with limited assets will seek out a loan in exchange for their car’s official title. The process for borrowing title loans from a bank is very similar to borrowing vehicle loans.

But even though the process is similar, the products are wildly different. With a vehicle loan, borrowers use money to purchase a car, but with a title loan, borrowers use their car as collateral in order to secure money that can be used for any personal purchase. The collateral in title financing is the borrower’s vehicle, which is repossessed and sold by the lender in the event that the borrower defaults.

In order to obtain a title loan from a bank, borrowers should first see if they qualify. Applications will require paycheck stubs and tax forms. Lenders need to view the current income level of a borrower in order to see if an applicant is able to make payments on the debt. Creditors will also view the applicant’s credit score to see if a borrower qualifies for financing. Some applicants with less than satisfactory credit scores will be rejected.

Banks must appraise a vehicle in order to establish its value prior to deciding on how much money to lend to a borrower. Unfortunately, not all vehicles qualify for title loans. Lenders are likely to turn down old vehicles with high mileage since there is too much risk that these vehicles could become worthless should it come time to sell them. Most lenders only accept vehicles up to a minimum age. Comparing lenders is the best way to decide which lender is best. Fortunately, car guides, such as NADA and the Kelley Blue Book, allow borrowers to see the general value of their vehicle before ever stepping foot into a bank.

Insurance requirements for title financing require that an owner carry liability coverage until the debt is repaid. This insurance protects both the borrower and the lender in the event that the vehicle gets totaled in a car accident. In the event of a car accident, the insurance company will pay off the debt.

Once approved, borrowers must hand over their title to the bank that then becomes listed as the lien holder of the vehicle. In exchange, borrowers walk away with money. However, the title that a borrower submits must not contain any existing lien holders. When the loan is paid off in full, the lender will give back the title to the borrower who once again becomes the sole owner.