Request Title Loans or Car Title Loans Against All Types of Vehicles
Title loans, also known as "title pawns" or "car title loans" are short-term cash loans secured by a borrower's title to a vehicle. This means that the vehicle's title will be used as collateral until the borrower is able to repay their loan. Auto title loans can also be taken out against other vehicles, including trucks, RV's and motorcycles.
How Do Title Loans Work?
Car title loans can range from $100 to $5,500 and can be equal to 25% to 50% of the value of the vehicle being borrowed against. These loans are typically taken out for an average of 30 days.
Title loans can be viable resources for consumers who may have exhausted all other traditional or conventional loan options and need alternative financing. In fact, roughly 2 million individuals opt for such loans, with 7,700 licensed car title lenders across 21 states in the U.S.
While car title loans can be useful in emergency financial situations, consumers may also choose to take out a loan for any number of non emergency reasons, such as:
- Medical expenses, including insurance co-pays and money for prescription drugs and over-the-counter medications
- Vacation expenses
- Home improvements
- Personal expenses
- Business opportunities
- Child-related expenses
- Educational costs
How to Get a Title Loan
Consumers can apply for a title loan at a storefront lender or online. While the information needed may differ from lender to lender, typical title loan requirements include:
- A state-issued ID or driver's license
- Title of the vehicle to be borrowed against
- Proof of income or bank statements
- Proof of residence
Applicants should note that in some cases, lenders might also require a car inspection and proof of car insurance. Borrowers should possess complete ownership of the vehicle in question. In some cases, partial ownership or equity is permitted.
While title loans can provide relief for consumers who have urgent cash needs, there are no car title loans for bad credit or "no credit check" options. Much like traditional loans, lenders will consider an applicant's credit score and history in determining their ability to meet loan terms.
Consumers with poor credit scores or histories can still apply for a title loan to see if they are approved.
Borrowers should also note that state laws determine car loan authorization, terms, and consumer protections. Consumers who are applying for car title loans online should make sure they are aware of the rules and regulations associated with title lending in their specific state.
If borrowers are approved, they will be required to give up the title to their vehicle in exchange for the loan, until it is paid in full. Funds can be deposited in a borrower's account within a few business days.
Are Title Loans Bad?
Title loans can be beneficial in situations of financial distress, yet there are a number of risks consumers should keep in mind when considering opting for one.
While there are 16 states that permit title loans at triple-digit rates, the remaining states have strict restrictions or prohibit such lending altogether. Such harsh restrictions on title lending are typically due to the steep fees and high default rates that are associated with them.
Most title loans have triple-digit APRs. For example, most title lenders will charge an average of 25% interest per month, which is about 300% APR, while the average cost of a typical credit card is 16 to 26% APR. In fact, the loan amounts taken out are often 25 to 50% of the total value of the car being borrowed against and loan amounts can be as high as $10,000 from some lenders. Such high fees can cause borrowers to rollover multiple loans and can trap them in an unsustainable cycle of debt.
Studies show that only 12% of title loan borrowers are able to pay back their 30-day loans on time, while roughly 40% are forced to roll their loans seven or more times. Further, one in nine car title loan borrowers fall behind on their payments and only about one in eight loans are repaid without subsequent re-borrowing, according to a PEW study.
Because loans are taken out against a borrower's title, vehicles in question can be repossessed if loan terms are not met. The Consumer Financial Protection Bureau (CFPB) reported in 2016 that one in five title loan borrowers had their vehicles seized for failing to repay their loans and that more than half of borrowers become burdened by their debts, long-term.
Financial experts advise borrowers to only take out a short-term loan if they are able to afford it and are aware of all loan terms and conditions.
Alternatives to Title Loans
Financial experts advise consumers to create a budget when determining loan affordability. Budgeting can not only provide insight into financial habits and unnecessary monetary spending but may also be able to highlight areas where consumers can save money and avoid short-term lending options.
In addition to budgeting, consumers can save in order to be prepared for potential cash shortages. More than half (57%) of American consumers have less than $1,000 in their savings account and only 39% report that they are able to cover a $1,000 financial emergency.
Consumers who do not have alternative financing options can consider the following:
- Applying for an affordable personal loan
- Asking employers for a paycheck advance to cover bills that may be due before paychecks
- Seeking assistance from nonprofits or other local financial institutions
- Looking into government assistance programs that may be able to offer relief
- Borrowing money from trusted friends or family
- Opting for a personal loan or a more conventional loan from a bank or credit union
- Cutting discretionary spending in order to save up for unexpected monetary needs
While auto title loans can provide financial relief in an emergency situation, there are limitations and potential risks that consumers should keep in mind before opting for one.
- Borrowers must have full or partial ownership of the vehicle they wish to borrow against.
- Title lenders will consider an applicant's credit score and history to determine if they are approved or not.
- Laws and regulations differ from state to state and restrictions may affect a resident's ability to take out a loan.
- Loan APRs can be steep, which often causes high default and rollover rates. This can be detrimental for a borrower's credit score and may place consumers in a deeper financial recess.
- Borrowers who fail to repay their loans may have their vehicles repossessed.
- Budgeting and saving can prevent consumers from relying on small-dollar loans.
Borrowers who are eligible and can afford a title loan can apply online with the necessary materials, to see if they are approved.