4 Things to Know Before Applying for a Car Title Loan

Title loans provide vehicle owners a quick and straightforward path to securing a loan. Many lenders are flexible with credit score prerequisites, considering the car’s worth when deciding on the loan sum and eligibility. In many cases, borrowers can receive their loan within 24 hours. Here’s an overview of four key points borrowers must understand prior to applying for such a loan.

Car Ownership or Equity Is Required for a Car Title Loan

A car title loan is a minor secured loan that utilizes your vehicle as security. These loans typically range from $100 to $5,500, usually representing 25% to 50% of the vehicle’s worth. The term of the loan is brief, often just 15 or 30 days. Despite being referred to as a “car” title loan, it can also be applied to other types of vehicles like trucks and motorcycles.

One of the key title loans requirements is having a clear title, complete ownership of the car with no liens, or at least some equity in your vehicle. Besides your car title, title loan requirements often include the lender wanting to see your vehicle, a photo ID, and proof of insurance. Upon approval of a car title loan, you hand over your car title to the lender in return for the loan. After repayment of the loan, you reclaim your title.

Credit Checks Are Not a Requirement 

For those lacking exceptional credit, car title loans could provide the needed funds without a credit check. The loan is usually based on your vehicle’s title and not on your credit history. Most lenders insist on complete ownership of your vehicle. Yet, some might consider a loan if you’ve largely cleared your current auto loan. Usually, they’ll need your title, ID, and insurance proof before granting the loan. Vehicle inspection and an additional set of keys may also be required.

Failure to Repay Could Result in the Loss of Your Vehicle

20% of individuals who procure car title loans lose their vehicles to repossession. As with other lending options, you must only borrow what you can feasibly repay when taking out a car title loan. If you cannot settle the loan within the agreed-upon period, it’s common for lenders to roll your debt into a new loan, leading to additional interest and fees on top of your current balance.

Failure to clear this increasing debt could lead to the lender repossessing your vehicle. You’d need to pay an extra sum in addition to your existing debt to recover your car. If you’re unable to meet these costs, the lender may sell your vehicle to recover their funds

High Fees and Interest Rates

Lenders often impose approximately 25% of the loan amount as a monthly financing charge. To illustrate, if you secure a $1,000 car title loan for a 30-day period with a fee of 25% ($250), your repayment sum at the end of the month would be $1,250, plus any additional fees incurred.

This situation equates to an annual percentage rate of over 300%. This rate is significantly higher than other credit options, such as credit cards. When taking out a car title loan, the lender should disclose the APR and the total cost of the loan. This information lets you compare different lenders and choose the most advantageous deal for your circumstances.


A car title loan can be a financial lifeline when you urgently need cash and your credit score isn’t favorable. Understand the details outlined above before securing a car title loan, enabling you to make an informed monetary decision.