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How to get a title loan

These six steps take you through the process from start to finish.

1. Compare lenders. Look at features like APRs, how much you can borrow, where it’s located and eligibility requirements to find a lender that’s right for you.
2. Fill out the application. Typically, you’ll need your car’s make, model and mileage, as well as your contact information and details on anyone else on your car title. You can often complete this step online.
3. Bring your vehicle for inspection. Lenders like to check your vehicle to make sure it’s up to standards. Some also install a GPS tracker to help them locate it if you default.
4. Submit your documents. Title loan providers generally ask for documents to verify your income, residence and identity.
5. Sign your loan documents. Read the terms and conditions before signing off on your loan.
6. Collect your funds. You can usually get your money in cash within 30 minutes of arriving at the store.

What is a title loan?

A title loan is a secured loan that uses your car’s title as collateral. Usually, you repay the loan plus a fee in one lump sum. You can get your cash in as little 30 minutes and lenders have few requirements besides having a car title.

But title loans are one of the most expensive loans out there, charging fees equivalent to a 300% APR or higher. They also come with the risk of losing your car and getting caught in a cycle of debt. For this reason, title loans are illegal in some states.

How much do title loans give?

You can usually borrow between between 25% and 50% of the vehicle’s value, according to the FTC. Most lenders offer between $100 to $5,500, depending on the state of your car and where you live.

When inspecting your car, lenders consider factors like its year, make, model, mileage and general wear and tear. Your income and current debts can also affect how much you can borrow.

How much does a title loan cost?

Most title loans come with a flat fee of around of 25% of the loan amount, according to the FTC. If you extend the loan, most lenders charge a similar fee per extension. Installment loans often come with interest rates that are similar to fees the single-pay lenders charge.

So, say you get $500 in cash for your car title. If you pay it back within 30 days, your lender might charge you a $125 fee, which works out to a 300% APR. But if you extend it for another 30 months, you’d owe a fee of $250, which is equivalent to a 600% APR. If you extend it more than three times, you’ll owe more in fees than what you originally borrowed.

Title loan terms

Single-pay loans — the most common type of car title loan — have a term of 30 days, though it can be short as 15 days in some cases. Some lenders also offer installment title loans, which breaks up your repayments over a term of around 12 months. But these are much less common than the single-pay option.

Some lenders allow you to extend a single-pay loan, though how often varies by state. Many states limit how often you can extend a title loan and some ban it outright. That’s because extending a loan even once doubles the cost of your title loan and makes it even harder to pay it back.

Where to get a title loan

The most common way to get a title loan is in person at a store. While you might be able to apply online, in most cases you still have to bring in your car and title for inspection. This can be a good thing — it’s harder for a brick-and-mortar lender to break the law than an online lender.

In the rare case that you can find a title loan entirely online, you’ll likely need to submit more documents. And it can take at least one business day to get the loan.

Required documents

Generally, you need to be able to provide the following documents to get a title loan

• Your car’s title. You can’t be using your title as collateral for another loan. If someone else’s name is on the title, they usually must apply with you as a co-applicant.
• Your car. Your lender won’t keep your car, but it will need to inspect it first.
• Proof of income. Some lenders require you to be employed, while others accept borrowers on welfare or with a pension.
• State-issued ID. This helps your lender verify your identity and age.
• Proof of residence. You might have to provide a utility bill or copy of your lease or mortgage.
• Bank account information. Not all title lenders require you to have a bank account, but some might.

Can I get a title loan without a clear title?

No, you must have a clear title to get a car title loan. This means that you can’t be using it as collateral for another loan — including your original auto loan. If you don’t have a clear title, you might want to look into auto equity loans instead.

Is a car title loan a good idea?

Title loans are expensive and best left for emergencies — if they’re even legal in your state. They might be one of the few options available to you if you don’t have a bank account, have recently filed for bankruptcy or have bad credit.

But you could get caught in a cycle of debt or lose your car if you don’t pay it back. You also run the risk of borrowing from a tribal lender, which isn’t subject to state laws, or a US lender that isn’t acting legally. And many legal providers offer unnecessary add-ons like insurance to bump up the cost of your loan. This puts you at a higher risk of getting trapped in a cycle of debt.

The title loan cycle of debt

A recent Consumer Financial Protection Bureau (CFPB) survey found that people who take out a single-payment title loan are at high risk of starting a cycle of debt.

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Alternatives

Title loans are meant as a last resort. And even then, they might not be right for you. Instead, here are some other options:

• Local resources.Most states have programs that will cover some of your food, medical or home costs. You won’t have to pay back any money you receive. But it can take a while to get approved.
• Friends or family.Your loved ones might be willing to help it you’re tight on cash. You can even make your loan legally binding by drawing up a contract. The downside is you risk ruining your relationships if you can’t repay.
• Payday alternative loans (PALs). Some federal credit unions offer PALs from $200 to $1,000 with APRs capped at 28%. They’re much more affordable than a title loan, but you likely won’t be able to get your money as fast.
• Community development financial institution (CDFI) loans. These nonprofit lenders are typically local banks or credit unions that offer affordable short-term loans to nearby residents. But like payday alternative loans, CDFI loans can take longer to fund.
• Credit card cash advances. If you have an emergency expense and a credit card, taking out a cash advance is often less expensive than a title loan. It’s still not cheap, though: You have to pay a fee and start paying interest right away.
• Installment loans.This short-term loan works doesn’t require collateral and gives you up to 18 months to pay off the funds It still has a high APR and can be even more expensive than a payday loan in the long run.
• Payday loans. Similar to a single-payment title loan, a payday loan can get you cash the same day you apply, but without collateral. But rates can be upwards of 700%, and you often can’t borrow more than $500 at a time.

6 auto title loan alternatives

What happens if I don’t pay back a title loan?

It depends on where you live. If you live in a state that regulates title loans, you might expect your lender to take the following steps:

1. Offer the option to extend. Also known as renewing or rolling over your loan, this gives you another 30 days to pay back your loan. Though you might be charged a fee to extend it.
2. Offer a payment plan. If you still can’t repay, your lender might offer a more affordable payment plan before taking steps to repossess your car.
3. File a lawsuit. Your lender must file a legal claim on your car with a civil court before it can repossess it.
4. Repossess your car. Sometimes you’ll have a chance to drive your car to the lender and remove your belongings. Otherwise, they’ll come to your home and take it from you.
5. Sell your car. To collect on the money you owe, your lender sells your car in an auction. Some states require lenders to only keep funds that cover your loan and the cost of repossession. Others let them keep everything.

Title loan defaults by numbers

Bottom line

Auto title loans are one option if you need money today and don’t have strong personal finances. But they’re expensive and come with a high rate of default, meaning you could lose your car if you can’t afford repayments.

Check out our guide to payday loans to learn about even more options for fast cash when you have bad credit.

Frequently asked questions

Read on for even more answers to common questions about title loans.

Can you get denied for a title loan?

Yes, it’s possible to get denied for a title loan if you don’t meet the lender’s basic requirements. If your car isn’t valuable enough to support the loan you’re applying for, your application will probably be denied. You could also be denied if you aren’t a US citizen or permanent resident — or live in a state where title loans are illegal. Make sure you and your vehicle meet your lender’s requirements before you apply.

Should I get a title loan buyout?

A title loan buyout works like refinancing: You take out another loan to pay off your title loan, ideally with more favorable rates and terms.

It’s another way to extend your loan without rolling it over. But like rolling over your loan, you could end up paying more in the long run.

Does the car have to be in my name?

Yes. You will need to be the legal owner of the vehicle to cash out on the title. If two people own the car, confirm with the lender whether you’ll need permission from the other person listed on the title or if you’ll need to get a joint car title loan.

Can I get a title loan without a job or proof of income?

It depends on the lender. Some accept any form of income as proof of your ability to repay, while others require you to be employed. And others might not look at your income at all. Learn about more of your options by reading our article on loans you can get while you’re unemployed.

How can I stop a title loan repossession?

If you’re able to pay off your balance in full right away before the lawsuit is over, you might be able to negotiate a deal with the lender. Otherwise, there’s little you can do once your lender is given a court order to repossess your car.