What To Know About Car Title Loans

For anyone who owns their vehicle and needs some quick cash, a car title loan may be a viable and helpful option. These car title loans can be an effective way for vehicle-owners to pay for immediate needs like bills and groceries, and their biggest draw is that the process to receive them is relatively quick and easy. For this reason, many people seek out these loans when they’re dealing with an unexpected emergency. In certain situations, a car title loan may be the best route to take, but it’s important to know exactly what you’re signing up for before seeking one out. Like most types of loans, auto title loans come with pros and cons that any interested vehicle-owner should be aware of.

Requirements for a Car Title Loan

Most importantly, receiving an auto title loan requires that you either own your car or have some equity in it. This is because this type of loan actually uses your vehicle as collateral, and the loan amount will typically be equal to between 25% and 50% of the car, truck, or motorcycle’s value.



Auto title loans are short-term loans; their duration is usually between 15 and 30 days. Assuming you own 100% of the vehicle, getting one of these loans will also require that there aren’t any liens on it; although 100% ownership is not necessary provided that you at least have an ownership stake.

Auto title loans, which are also referred to as “pink-slip loans”, require that you have possession of the vehicle, a photo ID, and proof of insurance. You’ll need to present these things to the lender, and give them your car title in exchange for the loan amount. Once you’ve paid off the loan in full, you’ll get the title back.

Fees and Interest Rates

The primary downside of selecting a car title loan is the amount that it will cost you in fees and interest payments. In many cases, the interest rate is significantly higher than it would be for other types of loans. It’s relatively common for lenders of auto title loans to demand roughly 25% of the loan amount per month in interest alone, which doesn’t even account for other fees.

This means that the annual percentage rate (APR) can reach levels above 300%, which is extremely high. So, if you were to borrow $1,000 for only one month on a car title loan, you may end up having to pay back more than $1,250 in total. Anyone considering this type of loan should ensure beforehand that they’ll be able to afford such a high interest rate.

The good news is that those seeking an auto title loan can easily compare potential lenders to find the most agreeable rate. Every lender is required to disclose the APR and total amount of the loan upfront, and there’s no reason to choose one without hearing what others can offer you first.

Risks and Benefits

Auto title loans should never be entered into by anyone who isn’t completely sure they’ll be able to repay it. In some cases, lenders will allow a borrower who can’t pay to rollover the loan into a new one. However, this will also add further fees and interest to the loan, and going this route has the potential to become a vicious cycle in which one becomes completely overwhelmed with fees and interest they can’t afford to pay.

Ultimately, this can lead to a lender repossessing the vehicle. In this case, the borrower usually ends up having to spend even more money, whether to get the car back or to pay for a new vehicle.

That being said, car title loans do have benefits as well. Primarily, they can be very helpful for anyone who has an immediate need for money and has an assured source of income in the near future. In that case, the auto title loan will allow them to cover their immediate expenses, but they won’t be running the risk of being unable to cover the repayment.

There are many types of loans, and for each type there are certain situations that it’s best suited for. Before deciding on an auto title loan specifically, it’s always smart to consider other options as well.

Payday loans, personal loans, and even credit card cash advances are all viable options in certain circumstances, and it’s good to be fully informed before entering into a financial commitment.