A title loan is secured against the title of your vehicle. You can borrow between 25% and 50% of your vehicle’s total value with a title loan. When you are receiving your title loan, it’s likely that you lender will hold the title to your vehicle, but you’ll still be able to drive it.
You can get title loans with bad credit, providing you hold the title to a vehicle. Title loans usually have lower interest rates than payday loans.
What is a Title Loan?
Title loans are a secured loan against the borrower’s vehicle. With title loans, as your vehicle is used as collateral, the amount of money you’ll be able to borrow depends on the value of your vehicle.
A title loan is a short term loan. Whilst you are receiving your title loan, your lender will likely hold the title of your vehicle. You’ll still be able to drive your vehicle, but it’s title will be in your lender’s name. Your vehicle’s title will remain with your lender until your title loan is fully repaid. In many cases, the borrower will repay the title loan as a lump sum, but this isn’t the case for all title loans, and your repayment details will depend on your situation.
How Does a Title Loan Work?
Title loans use your vehicle as collateral for the loan. This means that the amount of money you’ll be eligible to borrow with a title loan depends on the value of your vehicle that the loan will be secured against. You’ll usually have to take your vehicle for an inspection in order to determine the value.
Applying for a title loan is usually quick and simple. Once you’ve taken your vehicle for inspection, you’ll need to determine if you’re eligible for a title loan by filling in the necessary paperwork for your lender. If the lender deems you eligible for a title loan, they will arrange for the funds to be released and for the title of your vehicle to be changed.
You should only ever borrow what you can afford to repay!
Can I Get a Title Loan With Bad Credit?
Yes, in many cases you can still get a title loan if you have bad credit. You would need to hold the title for a vehicle though that can be used as collateral in case you fail to repay.
As the loan is secured against a vehicle, even individuals with bad credit can apply for and receive a title loan. This is because the lender has security that the loan will be repaid in some way, even if the borrower cannot keep up with the scheduled repayments. For this reason, many title loan lenders don’t actually conduct a credit check.
How is a Title Loan Different to a Payday Loan?
Title loans are secured, whereas payday loans are unsecured. This means that title loan lenders have collateral if a borrower cannot repay, whereas payday loan lenders do not. A title loan is secured against the title of your vehicle, so even if you can’t repay, the lender will still receive their funds back.
Title loans typically come with lower interest rates than payday loans, but you have to offset this against the risk of losing your vehicle if you cannot repay. The amount you can borrow with a title loan is dependent on the value of your vehicle, whereas this is not the case for payday loans.
How Much Money Can I Borrow With a Title Loan?
You can borrow between 25% and 50% of your vehicle’s total value with a title loan. Title loan amounts depend on the value of a vehicle, so title loans are offered from as little as $100 to over $10,000. It’s all dependent on the total value of the vehicle that will be used as collateral.
We can’t stress enough how important it is to only borrow what you can afford with a title loan, and any kind of loan.
Justine is a full-time writer with lots of expertise and a wealth of experience in the financial world. In particular, she specializes in household income and consumer finance across the United States. Follow her articles for useful advice and top tips, guides on how to save money and lots more.