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What Can You Use a Title Loan for?


Currently, there are more quick loans becoming available to people. Many people cannot get a loan from the bank. These are either due to their low credit score, lack of a credit score, or simply do not meet the bank’s requirements for a loan.

Companies have begun to capitalize on this in recent years, leading to many people simply accepting the first offer they receive and not fully understanding what the loan type entails, how much they will have to pay back, and even the benefits and disadvantages of that loan.

Title loans have become increasingly popular as they work in a similar way to a pawn shop – see more here. There is no need to have any credit history, which makes the possibility of receiving a loan much more feasible for many people. But what is a title loan, and is it the best option for you?

Well, here we will tell you everything you need to know about title loans, from what they are to how the fees work and whether they are the right option for you. To learn more, keep reading.

What Is a Title Loan?

A title loan is a type of loan that uses your vehicle as collateral. Instead of proving that you have a good credit history, as you would need to get from a bank loan, title loan companies require collateral. This comes in in the form of a car or sometimes a motorbike.

You are proving to the lender that you have a possession that can cover, or is worth more than, the loan amount. This means that there is no risk for the lender as if you cannot meet the repayment requirements. They will take possession of your vehicle and sell it to cover their loss.

So, title loans are only available to those who have a car that has value. You are typically offered a certain amount of money based on the value of your car, which the company will determine according to the details that you provide. The lender may ask for any of the following information:

  • Make of the car
  • Year the car was made
  • Any damages
  • Whose name is on the title

All these details will allow the lender to appraise your car and give you a loan amount that is less than the value of your vehicle. Again, they are ensuring that there is no risk. Do not expect to get a loan amount that is greater than the value of your car.

How Does a Title Loan Work?

Typically, a title loan is like a payday loan in that it is a short-term loan for a small amount of money.

  • Title loans are usually approved or denied very quickly. The process can sometimes take as little as 15 minutes from start to finish.
  • Once the lender has all the details they need, they will run through the loan agreement terms with you to make sure that you know all the terms and conditions.
  • If you are unsure about the repayment schedule, fees, or any extra charges, make sure that you ask about them here. Once you have signed the loan agreement, there is nothing that you can do to change these terms.

In most cases, you can still drive your car while taking out the loan. Do not be alarmed if the loan company requests to install a GPS tracker in your car or even make a copy of the car key. This is to cover themselves if they need to take ownership of the vehicle.

How much can you borrow?

Title loans are not known to be the largest of loans and are typically smaller amounts of money. Exactly how much you are offered will depend entirely on the value of your car.

Usually, most title loan companies will allow you to borrow up to 50% of the car’s value, although this may be capped at as little as 25% for some.

On average, a title loan will get you between $100 and $5,500. However, some companies will lend up upward of $10,000, depending on the car’s condition and value.

Similarly, the loan schedule can vary. In some cases, the loan term will be over as little as 15 days or a month. Some companies will grant one year.

What Are the Fees?

One of the significant downsides to taking out a title loan is the interest. Because title loans are a type of short-term loan, companies will often add very high repayment fees. Remember that these companies are not here to help you. Their goal is to make money and run a business.

The most typical rate for a title loan has an APR of 300%.

So, if you know that you will not have access to this extra money, in addition to the sum lent to you in the first place, then do not consider taking out a title loan. You will not be able to meet the repayment requirements and your vehicle will be taken away.

For example, if you borrow $1000 with this monthly fee of 25%. The loan period is one month. So, you will need to have $1,250 to pay back after the 30 days have expired.

These extra fees can be charged for anything from admin to crucial copying and even installing a GPS tracker. So, if in doubt, ask about any fees before signing the loan agreement.

Is a Title Loan the Best Option for Me?

Although a title loan may seem very appealing at first glance, it is worth remembering that it is a very costly way to have access to short-term money.

If you have a car that has a decent amount of value, it may be worth selling the car and downgrading as this way; you will be able to get more for your money and not risk losing the vehicle altogether.

However, if you know that you will have access to more money shortly and do not want to interrupt your everyday life or need money urgently but have no other way of sourcing it, then a title loan can be a good option. Remember, however, that you will need to pay the high fees.

Not being able to meet the repayment requirements for your title loan could lead to a cycle of debt. These are rollover loans. The amount you owe in fees can very quickly become astronomical.

So, it would help if you considered any options before taking out a title loan. As you can very quickly get swept into the game of rolling over your loan for fear of permanently losing your car. In the end, you may end up losing your car and having a significant amount of debt in the way of interest.


Title loans also look particularly significant for those who do not have access to more conventional loans. Usually, banks want some form of credit history.

You should only look to take out a title loan if you correctly understand your financial situation. The last thing that you will want is to be stuck in debt for a ton of fees, without your car, and with no option to get a new loan.