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Car Title Loans: What You Need to Know

How Do Car Title Loans Work?

Are you thinking of purchasing a certain asset but you are not sure how to finance it? Car title loans are a popular choice for people who need cash fast but can’t get needed funding through traditional bank loans. Let’s take a closer look at car title loans, how they work and what they offer.

Car title loans are a type of secured loan that uses the car you currently own as collateral in case you default on it. It is a short-term loan, typically given for the amount of $1,000 to about $5,000. The loan is secured by your car’s title, which means if you do not pay it back, the lender can seize it. In order to be able to qualify for this loan, you must have your car debt-free or have a significant amount of equity in it.

These loans are on the more expensive side and on average monthly finance fee is about 25%. So, let’s say you borrowed $2,000 for just one month. In this case, you will be paying $500 just for the interest fee. 

We recommend you explore other options like personal loans, lines of credit, or just use your credit card if that’s possible. Loans like this one should be looked at as a last resort since you do need to put your car at risk and also pay huge fees.

What Exactly Are Car Title Loans?

If you ever needed money fast for something, you probably heard of these loans. In case you are actually considering taking one out, let us give you a clearer picture of what they are and how to get a car title loan.

Simply put, this is a loan you take when there is no time to get a more traditional loan from a bank or you just can’t qualify for it but need funds fast. The amount you can borrow is determined by the value of your car. The lender will typically give you 25% to 50% of your car’s worth in exchange for you giving a title to your vehicle as collateral.

How Do Car Title Loans Work?

Before you contemplate whether is this the right type of loan for you or not, it’s essential you know how they work. The most important thing to keep in mind here is that your car is collateral in this loan, so if you do not want the lender to repossess your car be sure you can pay off not just the loan you took, but also other fees associated with it.

If you decide to apply, be sure to prepare proof you own your car, your ID card, and the second set of your car keys as they also may be required.

These loans are short-term so just keep in mind you’ll need to pay them off quite quickly. If you are not sure you’ll be able to secure the needed funding to pay them in full in the specified time frame do not consider taking out this loan. On top of the amount you borrowed, interest fees will add up quite a bit so think about that too.

Like with any other loan type you need to do your research and understand the terms and conditions associated with them so you don’t end up in a worse financial situation than you’ve been before taking one.

Car Title Loans: Pros and Cons

Let’s discuss some pros and cons of these loans so you can decide whether are they a good fit for you or not.


  • You’ll get money fast – these loans are usually issued within 24 hours.
  • The process is really easy with just a few documents needed- you can also apply for car title loans online.
  • You’ll keep your car while repaying a loan- only if you fail to pay your loan you could lose your vehicle. While making monthly payments there is no need for your car to be locked away in some garage.
  • There are no credit score checks, so you can qualify even if you have bad credit.
  • You could end up saving money on an interest fee . Even though they are high if you choose a really short-term loan, of just a couple of months, you could save some money compared to getting a long-term loan from a bank.


  • If you halt the loan, you will lose your car.
  • The loan terms are usually very short – typically 30 days or less. Although there’s an option to extend this period, it’s still a short amount of time so you need to make sure you’ll be able to pay it back.
  • High-interest rates – If you choose to pay this loan in a couple of months and don’t try to get a good deal from a lender you can end up paying quite a bit in just the interest fees.

Before signing anything be sure to weigh out these pros and cons we laid out for you, and decide whether getting quick cash is worth it or not.

How Much Can Be Borrowed Through a Car Title Loan?

You are now probably wondering “How much can I get for my car title loan?”. Firstly, based on the value of the vehicle you have, the amount of money you can get from this loan can vary. You can even get a title loan on a financed car but you’ll just need to find an appropriate lender. There are many car title loan calculators available online for you to have a general idea of what you can get.

The funds lenders offer are usually up to 60% of the value of your car. So, if the car is worth $9,000 you will be able to get about $5,400. These offers can also be different depending on a lender so browse around for a bit before deciding on anything.

The offer you get will partially be due to the income you currently have. Even though these loans have collateral a lender will still be hesitant to give you any money if it’s obvious that you’ll not be able to pay it back.

When Does a Car Title Loan Make Sense?

Taking this loan can in some cases make sense. If you are in need of cash as soon as possible, applying for this loan can be your best shot to get the needed funds within 24 hours. Title loans are some of the easiest to qualify for and have short terms if that is something you are looking for. Having a good car to put down as collateral is a great option because the higher the value, higher the loan you can take out. In case you have some temporary financial difficulties, the money you get this way can help you out, and once you are back on your feet just pay it off.

No matter what your needs are, money secured this way can help. If you took into consideration all the risks that come with this loan type and it still sounds like something manageable for you to pay back in full, we suggest you find a good lender who offers good terms and a lower interest rate.

Don’t forget to still consider other options available that may be a better fit for you. If you are able to qualify for a personal loan or maybe some other type with better terms and lower interest rate you should definitely do that because you could end up saving a lot of money.

If you are interested in taking out this loan and wondering “what are some car titles near me “we suggest searching online.

Alternatives to Car Title Loans

Car title loans are generally not the best option for borrowers. They tend to have high interest rates, which makes them difficult to repay. In addition, if you halt the loan, you could lose your car.

There are many alternatives to getting a loan on a car title. Depending on your needs and the amount you want to borrow, there are other options that may be even more suitable for you.

Personal loan

If there is a possibility of getting needed funds from a relative or friend, we suggest you explore that option. Even if you decide to take this type of loan from a bank, it can be a good option because of negotiable terms and lower interest rates than a car title loan.

Credit cards

In case you haven’t maxed out your credit card expenses, they can also be a good alternative depending on the amount you need.

A line of credit

With a good credit score also comes this possibility. They have lower interest rates than paying your credit card expenses and can be a good option if you need a bit more money.

Each of these options comes with its own set of pros and cons so think carefully before applying for any of them.

Bottom Line

A car title loan is a great option for short-term money borrowing. These loans can be anywhere from 30 days up to one year but we suggest you pay them back as soon as possible.

Car title loans are generally considered a risky form of borrowing and should be avoided if possible. If you must take out a loan but don’t have much time or a good credit score this may be one of your only options. In case you already took out this loan, be sure to pay it back in time to avoid any additional charges.

They are risky and can lead to a cycle of debt if not managed correctly, so talk to your financial advisor before agreeing to anything. 

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