What you need to know before putting your pink slip up as collateral on a short-term loan.
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How do motorcycle title loans work?
Motorcycle title loans work by using your motorcycle’s title as collateral for a short-term loan. You can typically borrow up to $10,000 depending on your state’s laws and the value of your motorcycle. Lenders also refer to these types of loans as motorcycle title pawns.
Like with other types of auto title loans, there are two main types of motorcycle title loans: single-payment loans and installment loans. Single-payment motorcycle title loans give you up to a month to repay your loan in full. Installment motorcycle title loans allow you to repay it over three to 12 months depending on where you live.
Motorcycle title loans are available to all credit types, and you don’t necessarily need a job to qualify. But they often come with APRs over 300% and can trigger a cycle of debt that can hurt your credit and personal finances. For this reason, many states regulate or outright ban title loans of all kinds.
How much is my motorcycle worth?
How much your motorcycle is worth depends on several factors, including the model, make, year, mileage and wear and tear.
You can use websites like Cycle Trader to get a rough estimate of how much your bike is worth. However, you’ll need to get it inspected by a professional to get an accurate number. Title lenders typically inspect your vehicle before approving your loan, so you can find out how much it’s worth when you apply.
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How do I apply for a motorcycle title loan?
The application process varies depending on your lender and state, but you can generally expect to follow a version of these steps:
- Have a lien-free motorcycle title. You can’t currently have any loans that use your motorcycle title as collateral.
- Have a regular income. You don’t need to be employed to get a title loan, but you need money coming in from another source like government benefits or a pension.
- Be the age of majority. You must be over 18 in most states to get a motorcycle title loan, though Alabama requires borrowers to be at least 19 and Mississippi 21.
- Have proof of residence. Some lenders might ask to see a copy of a utility bill, mortgage or lease agreement that shows you live in the state where you’re applying for a loan.
- Fast funding. Typically you can get your title loan in as little as 30 minutes if you apply in person.
- Lower APR than other short-term loans. While still costly, title loans typically are less expensive than payday or installment loans.
- Won’t lose your car. If you rely on your car more, with a motorcycle title loan you won’t risk losing your main form of transportation.
- Cash loan options. You might not need a bank account to get a motorcycle title loan.
- All credit types accepted. Good credit is not required to qualify for a motorcycle title loan.
- No job necessary. As long as you have proof of income from government benefits, a pension, alimony or anywhere else, you might qualify for a title loan.
- They’re expensive. Motorcycle title loans typically have APRs in the ballpark of 300%.
- Could get trapped in a cycle of debt. Most single-payment title loan borrowers have to renew their loan at least once, doubling up on interest and fees and potentially getting caught in a cycle of debt.
- Risk losing your motorcycle. If you can’t pay off your loan, your lender can repossess your motorcycle to cover what you owe.
- Not available in all states. Title loans aren’t legal in all states, so this option might not be available to you. Other states regulate title loan providers. To avoid predatory lenders, read up on your state’s laws before you apply.
- Application takes time. Unlike with other short-term loan options, you usually can’t complete the full application online. And even if you can, you’ll have to upload photos of your bike and documents, which can be time consuming.
Can I qualify?
Title loans, like other short-term loans, are usually easier to qualify for than a traditional personal loan. However, you generally still need to meet a few requirements:
Benefits of motorcycle title loans
From their lax credit requirements to their fast turnaround, here are some of the perks of motorcycle title loans:
What to watch out for
Consider these potential drawbacks before taking out a motorcycle title loan:
Motorcycle title loans are a fast way to get cash at a slightly lower rate than other short-term loan options. And if you have a car, you don’t risk losing your main source of transportation. However, all title loans are still expensive.