Car Title Loans – The Pros and Cons

car title loans

A car title loan is a kind of secured loan where a vehicle title can be used as collateral by the borrower.

Do you need money as quickly as possible? If so, you might want to offer you car as collateral to get a short-term loan. Once you agree to a car title loan, a lien will be placed on your car’s title by the lender, which will allow the lender to repossess your vehicle if you stop making your loan payments. Car title loans, like any type of loan, have both pros and cons associated with them.


A car title loan is a great option for borrowers who are in need of immediate cash. As soon as the lender and you are able to agree on the loan terms and amount, you will be able to get the money fast. Quite often, you will be able to walk out of your lender’s office with cash in hand on the same day that you apply for the title loan.

In contrast to other forms of financing, there is no lengthy or complex approval process involved with a car title loan. Since you are offering collateral for the loan, a car title loan is fairly easy to get approved for, even when you don’t have a good credit score. In fact, numerous lenders will provide you with a car title loan even if you have a bad credit report or credit score. So long as you have a car that is worth more than the amount of the loan that you are asking for and you have a source of income that is reliable, usually your loan application will be approved by the lender.

If a lien is placed on the title of the car by the lender, but they don’t keep the actual vehicle. That means you will be able to continue to use your car while you are making your loan payments. The only way you will lose your car is if you default on your loan by failing to make the monthly payments and your car is repossessed by the lender.


High-interest rates are often carried by car title loan. The rates are a lot higher than the rates on credit cards and in some cases might exceed 100 percent. A few states do have laws prohibiting exorbitant interest rates, however, many do not have these protections in place.

Car title loans are a type of short-term loan. This means they must be repaid within a 24 to 48 month period. If you cannot make the payments, then the balance will be raised even higher by late fees, and eventually, your vehicle will be repossessed by the lender, and that will lead to many other problems that you will have to deal with.

Tips for Borrowers

A title loan can cause problems, especially if the interest rate on the loan is very high. Before you take a car title loan out, consider options that are less expensive. Research loans from friends and family, cash advances, credit cards, and other types of consumer loans.

If you do need to take a car title loan out, be sure that you completely understand all of the terms. Ask about any fees accompanying the loan and what the APR is. Finally, be sure to make your payments by the due date every month to avoid having to pay additional fees on the balance and the risk of losing your car.

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