Everything You Need to Know About Car Title Loans


Taking out a car title loan is a quick solution when you are stranded for cash to pay bills, cope with an emergency, or manage debt. However, before applying for a car title loan, you should conduct extensive research to establish whether or not a car title loan, also known as a title pledge, is right for you. Here is everything you need to know about car title loans.

1. A car title loan is secured

Car title loans are short-term secured loans that use vehicles as collateral. To secure a car title loan, you must own a vehicle or have equity. Most lending companies require you to submit your vehicle’s title, indicating a hundred percent ownership of the car, without any aliens. You must also show your car, proof of insurance, and a photo ID when applying for a car title loan. Once your loan is approved, the lending company becomes your vehicle’s lien holder, and you get the title back when you clear the debt. 

2. Car title loans have a quick approval process

Perhaps one of the most significant reasons you should consider applying for a car title loan is the ability to access the loan within the shortest time possible. To apply for online title loans, you fill out the application form, submit the relevant details, and the lender will review your application within minutes. Unlike traditional bank financing, car title loan lending companies do not check your credit history. Once approved, you could access funds the same day.

3. You could lose your vehicle if you do not repay your loan

Did you know that 20% of people who take out car title loans have their vehicles repossessed? Like in other types of lender financing, it is critical to borrow a car title loan amount you can comfortably repay. If you secure a car title loan and cannot repay the amount within the specified time frame, the lending company will likely roll over the debt into a new one. This attracts more interest and fees onto the amount you already owe.

If you cannot repay the debt, the lending company could repossess your vehicle, and you have to pay more, alongside what you already owe, to get your car back. Suppose you cannot raise the amount; the lenders will put the vehicle up for sale to recoup their cash.

4. A car title loan has high interests rates and fees

While securing a car title loan is fast and easy, especially with bad credit, this type of lender financing comes with severe risks and costs. For starters, most lenders charge a 25% monthly interest on the loan amount to finance the loan. This translates to 300% APR, which is significantly higher than other forms of lender financing.

Some lending companies also charge lien fees, origination charges, key fees, document fees, and processing fees, among other charges. These charges, plus the 25% monthly interest, could quickly add up. Be sure to read the fine print and add up all costs before proceeding with your car title loan application.


A car title loan is a lifesaver when you need quick cash but do not have a good credit score. Familiarize yourself with the above information before taking out a car title loan to make the right financial decision. 

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