Title Loans – Why & How to Get One
What is a title loan? A title loan is a small loan that you can obtain using your car title as collateral. You must have complete ownership of your vehicle in order to qualify for a title loan, but interest rates and fees are high. Be sure to pay back your title loan as soon as possible or you could end up owing far more than your vehicle is worth.
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UPDATED: Apr 29, 2021
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- Title loans are small, short-term loans that don’t require a credit check.
- Title loans get you money fast, but charge higher than usual interest rates and fees.
- Failing to pay back a title loan can result in the loss of your vehicle and further financial distress.
Sometimes unexpected things happen and you need money fast. For those with poor credit, you may have trouble finding an institution to loan you money to pay for such an emergency. In such cases, a title loan may be right for you.
But if you’ve never taken out a title loan before, you may be wondering if it’s worth doing. You may even be asking, “What is a title loan?” “Can I get a title loan through a bank?” Fortunately, we can help.
Keep reading below to find out what a title loan is, how to get one, and why it might be worth it. When you’re ready, enter your ZIP code into our free comparison tool above to find affordable title loans from lenders in your area.
What is a title loan?
A title loan is just like any other loan except instead of using your credit score to justify the loan you use your car title as collateral.
You will only be able to take out a loan worth a fraction of the value of your vehicle, which is why title loans are typically for small amounts from as little as $100 to as much as $6,000.
Unlike other loans, title loans don’t require a credit check. This makes them extremely easy to get, especially for those with poor credit who need money fast.
Keep in mind that title loans are short-term loans, usually for 15 to 30 days. Because lenders charge higher than usual fees for these loans, you don’t want to take out a title loan for more than one month.
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How do I get a title loan?
In order to get a title loan you have to own your car outright, that is, own the car’s title. If you lease your car or still owe money on it, then you won’t be able to get a title loan.
Your lender may also ask for your driver’s license, a picture of your vehicle, and proof of insurance before they decide to lend to you. They usually won’t run a credit check.
If you’re approved for the loan, then you’ll give your car title to the lender and they’ll hold onto it for the length of the loan. You’ll still be able to use your car, but if you default or fail to make a payment, they could repossess the car on you.
Because the approval process is so simple and you get your money fast, title loans are great if you need money immediately.
Is a title loan worth it?
If you or your family are in need of money to pay an emergency medical bill or some other sudden expense, then a title loan may well be worth it for you.
If you try to get a standard loan on short notice, you may not see the money for weeks. And if you have poor credit, you may not get approved.
However, keep in mind that title loans can be extremely expensive long term. Lenders can charge as much as 25% of the loan amount per month to pay for the loan. That’s a hefty charge for such a small loan.
Because of the high fees and interest rates, it’s important you pay back your title loan as quickly as possible. Otherwise, you could end up paying back far more than the loan was worth or even lose possession of your vehicle.
In fact, according to the Consumer Financial Protection Bureau, one in five auto title loan borrowers have their vehicle seized for failing to repay debt.
Even so, a title loan can be crucial for financial emergencies. You may be tempted to go online and find other ways to get money fast, but never borrow money from strangers online. It’s just not safe.
Now you know the answer to the question, “What is a title loan?” If you need a loan fast, enter your ZIP code into our free comparison tool below to find affordable title loans from lenders in your area.