Title loans provide fast, short-term cash for people in a crunch. In exchange for the title to your car, a title loan lender will give you money. The catch is there’s usually an extremely short repayment window — two to four weeks — and if you don’t pay up, the lender keeps your car.
Learn the key pros and cons of using title loans when you need money fast.
A title loan uses the title of an asset as collateral. The most common kind of title loan is a car title loan, where the lender holds on to your vehicle’s title to ensure you repay the money you borrow. If you don’t repay the loan in full, you lose the car.
Typically, you’ll need to own your car outright if you want to get a title loan. The title needs to be lien-free, meaning no one else has a claim to it (such as the company you financed the car through). Lenders often won’t or can’t take your car title if you still owe money on the car. If you borrowed money through an auto loan to purchase the car, your title is probably still with the auto lender.
Most title loans are issued quickly, since you’ve got the vehicle title as collateral. You can borrow a few hundred to a few thousand dollars — but you’ll typically only have 30 days or less to pay it back, plus interest.
To get the loan, you’ll generally need to bring the title, driver’s license, insurance card, and spare keys to the loan office. Usually, you’ll be able to keep driving your vehicle. Once you’ve repaid the loan in full, you’ll get your car title back.
Title loans can be tempting when you need cash fast and your options are limited. But it’s almost always best to pursue an alternative source of funds.
Plus, putting your car or truck title in a lender’s hands is risky. If you default on a title loan and lose your vehicle, it could prove difficult to replace it.
Sometimes, in an emergency, a title loan may be your only option. If you truly have no other choice, do everything you can to make sure the loan is repaid on time.
Fortunately, you probably have several other options worth considering.
Related: Learn more about getting a personal loan
The max you can borrow using a title loan will probably be about $15,000. Most lenders are going to cap the loan amount at 25% to 50% of your car’s value. You can borrow up to the limit, but it’s better to choose a lower amount if you don’t need that much.
For example, if your car title is worth $20,000, and the lender offers you a loan of 50% of your car’s value, the title loan would be for $10,000. Or, if your car is worth $10,000, and the title loan is for 35% of the value, the loan amount would be $3,500. To find out the value of your car, use sites like Kelley Blue Book or J.D. Power to research estimates.
Some lenders specialize in this type of loan, but they’re not available in every state. You can apply online or in person at a loan store, depending on where you live. You’ll need to have some documents with you when you apply, including:
You might also need to provide your Social Security information, a bank statement, registration information, and possibly a car inspection report.
The loan office agent might also need to appraise your vehicle before giving you the cash. If everything looks good, you can get approved the same day — sometimes in less than an hour.
You have to be the legal owner of the vehicle if you want to use it for a title loan. If someone else owns the car, but you drive it, that won’t work. If your name is on the title along with someone else’s, you might need that person to fill out the application for the title loan with you. If they refuse, you’ll probably have a difficult time getting the title loan.
If you’re in a cash crunch, it’s understandable that you want fast, easy money. But before you put your vehicle at risk, make sure you’ve looked at all the pros and cons of using a title loan. You might find that an alternative source of funds is the better bet for your financial needs.
Related: Learn more about getting a personal loan