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 1, 2012

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The amount received on a car title loan depends on the car offered as collateral. It can range from several hundred dollars to several thousand dollars.

A title loan is considered a secured loan which means that its value is based upon collateral. Since a lender receives a car as collateral, there is no background or credit check necessary. Anyone with a car in their name can get a car title loan.

Each state and lending company has different policies for the lending amount. It is important to review the lending policies before proceeding with a loan. One commonality shared between lenders is a similar loan proportion rate. If a borrower’s car is an old model of a commonly found car, the loan amount they qualify for will be low. For a newer luxury car, or even a rare model, the possibilities for a higher loan increase drastically.

Car title loans are a popular and easy way to access money because the loan is usually processed within a day or two due to the easy application process. The lender must appraise the borrower’s car to confirm it is worth, at minimum, what the car title loan is worth. Typically the lender will loan less than 30 to 50 percent of the car’s overall value. The borrower does not need to reach the maximum value of the title loan and instead should only borrow what is necessary. That is always an important reminder for any type of loan: borrow only what is necessary.

Another financial aspect to keep in mind when applying for a car title loan is the length of the loan. The allure of a title loan is its ease of access.

Conversely, one negative aspect is the high interest rates. Since these types of loans are meant to be short-term and paid off quickly, they do not mature inexpensively. Although car title loans are cheaper than payday loans, many lenders keep their APR’s in the two-to-three digit range, which is higher than other long-term forms of financing.

While car title loans might be easy to access, they should not be taken lightly. Since they are secured, if the loan repayments are defaulted, then the lender will repossess the borrower’s car and sell it for a cash reimbursement. A borrower should read recent news about the auto lending field and research several lenders before making any decisions.