What are the Requirements for a Title Loan? What are the Title Loan Risks?

Title Loan

A title loan is a short-term loan that uses your vehicle's title as collateral. This means you borrow money from a lender and use your car title as a guarantee that you will repay the loan.

If you don't repay the loan on time, the lender can repossess your car and sell it to get their money back.

Here's how it works: 

You take your car and some papers to the lender. They need to check your car and papers before giving you the money. They keep your car's title, which means they have a right to it, and give you the money.

You can usually borrow between 25% and 50% of your car's value. You have to pay back the money, plus extra fees and interest, within a set time, usually 30 days. Then you get your car title back, free of any promises to the lender.

What are the Requirements for a Title Loan?

1. Clear Vehicle Title

   • You must own your car outright, meaning it's fully paid off and there's no money owed on it. The title (proof of ownership) must be in your name.

2. Identification

   • You will need a valid ID, like a driver's license or state ID card, with your name on it, matching the name on the car title.

3. Proof of Address

   • You need to show where you live. This can be done with a utility bill (like water or electricity), a lease agreement, or a mortgage statement that has your name on it.

4. Vehicle Registration

   • Your car must be legally registered in your name, proving it's allowed to be driven on the road.

5. Vehicle Insurance

   • You must have insurance for your car to protect it in case of an accident.

6. Proof of Income

   • You need to show you have money coming in regularly. This could be recent pay stubs from your job, Social Security or disability benefits, or other documents that show you can repay the loan.

7. References

   • You need to provide contact information (names, phone numbers, and addresses) for at least two people who know you.

8. Vehicle Keys

   • You should have working copies of your car keys.

9. Photos of Your Car

   • For online applications, you might need to send pictures of your car from different angles, including the inside, the mileage on the odometer, and the Vehicle Identification Number (VIN).

What are the Title Loan Risks?

Auto title loans might seem helpful if you need money fast, like for car repairs, but they can cause big problems. It's usually better to avoid them if you can. Here’s why they are risky:

Short Repayment Time

You usually have only 15 to 30 days to pay back the loan, sometimes up to 60 days. It's hard to repay the loan and fees so quickly. If you can’t, the loan gets extended with more interest and fees.

High Interest Rates

Interest rates are very high, often much higher than other loans. You end up paying a lot of money just in interest. You might pay hundreds of dollars in fees and still owe the original loan amount.

Risk of Losing Your Car

If you can’t pay back the loan after several extensions, the lender can take your car and sell it to get their money back. In some places, the lender doesn’t have to give you any money left over after covering the loan and fees.

Need to Own Your Car

To get a title loan, you usually must own your car completely, with no other loans on it.

What is the Annual Interest Rate for Title Loans?

Car title loans cost much more than regular bank loans. 

1. High Interest Rates

   • Interest rates are very high. In some places, they can be 25% per month or 300% per year. If you borrow $1,000, you’ll need to pay back $1,250 in 30 days.

2. Extra Fees

   • Lenders charge extra fees, like:

Lien fees

Origination fees

Document fees

Key fees

Processing fees

• These fees can add up quickly, often costing an extra $25 or more.

3. Total Costs

   • High interest rates and extra fees make these loans very expensive. In 2022, people paid over $700 million in fees in the 17 states where title loans are allowed.

When thinking about a car title loan, be sure to add up all the interest and fees to know the total cost.

What are the Benefits of Title Loans?

The benefits of title loans are:

• Car title loans are different depending on the company you choose.
• Our company has been providing loans since 1998 and has good customer service.
• We handle over 3,000 loans daily and have 1,000+ locations in 16 states.
• You can learn more about us on our website.
• We approve loans quickly, sometimes in just 30 minutes.
• No credit check is needed for approval.
• We use your car title as collateral, not your credit.
• If you don’t repay the loan, you might lose your car.
• You can still drive your car while using it as collateral.
• Our interest rates are competitive, making it easier to pay back the loan.

What are the Alternatives to Title Loans?

When you need money but don't want to risk your car with a title loan, there are other options to consider:

Talk to Your Creditors:

If you're struggling to pay bills, talk to the people or companies you owe money to. They might be willing to let you pay later or skip a payment without charging you extra.

Get Help with Debt:

You can talk to a special group that helps people with money problems. They won't charge you much or anything at all. You can find these groups through your job, a credit union, or local housing help.

Ask for a Personal Loan:

You can ask a bank or credit union for a loan based on your history of paying back money. These loans usually give you more time to pay and might be easier to manage than car title loans. They can help even if your credit score isn't great, especially if someone else promises to pay if you can't.

Try a Different Kind of Payday Loan:

Some special credit unions offer loans that don't look at your credit score. Instead, they check to see if you have enough money to pay them back. These loans come in two types, offering different amounts of money and time to pay it back.

Use Your Credit Card:

If you can, use a credit card instead of getting a loan. It's often cheaper. If you can pay back what you borrowed quickly, you might not have to pay any extra fees. You can also take out cash from your credit card, but this usually costs more than regular purchases.