Title Loans: What You Need to Know + Lenders to Avoid

Editor's note: Title loans may provide short term relief until your next paycheck, but these loans come with high interest rates and fees, which could lead to borrowers losing their transportation source. You may want to consider alternatives before taking one out.

When you have sudden financial needs, a title loan may seem like an easy way to get extra cash. The lenders tout an easy process, there’s no credit check and many will even come to you, saving you time and effort.

But title loans can be dangerous, and getting one is not a decision you should make lightly. These are very expensive, and the risk is very high. Here’s what you need to know.

What Are Car Title Loans?

An auto title loan is a type of secured loan that lets the borrower use their vehicle as collateral. Similar to payday loans, title loans offer a way to get quick cash to cover unexpected expenses. This could be anything from high utility bills to medical bills.

Title loans are extremely expensive: Most title loans have a high interest rate. The average monthly fee, according to the Federal Trade Commission, is 25%, which translates to an APR in the neighborhood of 300%. Other charges will also be added, including processing fees, document fees and loan origination fees. You may also be required to purchase add-ons, like a roadside service plan, to protect the title loan company. Many require repayment within 30 days, though some have a longer repayment period. To get a loan, you need to bring a vehicle you own and its title to a title loan lender. Then the lender will assess the vehicle’s value and make an offer based on a percentage of what it’s worth.

How Do Title Loans Work?

There are two kinds of auto title loans:

Single-payment loans: Borrowers must repay the loan in a single lump sum, usually in 30 days. These loans have an average APR (annual percentage rate) of 300%.
Installment loans: Borrowers must repay the loan over three to six months. The average APR is 259%.

Unlike most unsecured loans, title loans have very low credit or income requirements. This is because they use the vehicle as collateral. In some cases, the title loan company won’t check your credit at all, making it easy to qualify even if you have no or poor credit. Additionally, since the loan is secured with a vehicle, many lenders don’t ask for proof of income. However, the lender will place a lien on the vehicle before granting the loan.

With an auto title loan, the borrower gets to keep their vehicle and can use it as normal as long as they make payments. If they default on the loan, the lender can repossess the vehicle.

READ MORE: How do title loans work?

How Much Do Title Loans Give You?

You can borrow up to 50% of your vehicle’s value, though some lenders offer a maximum of 25%.

According to the Pew Charitable Trusts, the average title loan amount is $1,000. However, some loans are only a few hundred dollars, while others cap out at $10,000.

When taking out a title loan, factor in additional costs like the monthly finance fee and processing fees. Weigh the risks of taking out the loan as well since failing to repay the money can result in repossession. If that happens, not only will there potentially be other penalties, but you’ll also have to figure out another means of transportation.

What Are Title Loan Interest Rates?

Interest rates vary by lender and loan type (installment or single-payment). Fees, in general, also depend on the state.

An installment loan will generally cost more over time due to compounding interest. Additionally, most title loans come with a 25% monthly fee. For a single-payment loan, this equates to roughly 300% APR.

Say you take out a title loan for $2,000 with a 25% monthly fee and a 30-day repayment period. The total cost of that loan will be $2,500 ($2,000 principal plus $500 interest).

Depending on the lender, you also may have to pay:

Origination fees
Late fees
Processing fees
Document fees

You may also be required to pay for a roadside assistance plan.

These fees all add to the overall cost of the loan. Some states regulate title loans more than others, so costs vary by state.

What Happens If You Can’t Repay a Title Loan?

First, you’ll be able to roll your loan over into a new loan. However, those costs add up very quickly. You’ll have to pay a new set of fees. Using the same $2,000 title loan used above, a rollover will give you another 30 days to repay the loan, but will cost you an additional $500 in fees, plus any additional fees. So now, it will cost $3,000 to repay your loan in 60 days.

If you don’t make your payments on time and don’t arrange for a rollover loan, you will lose your vehicle, even if you make partial payments. Once a lender repossesses your vehicle, it can be sold and the lender can keep all of the money they get from the sale – even if they get more than your current loan balance.

Many lenders will even install technology that allows them to locate your vehicle and disable the ignition. This means that even if you could find a way to hide your vehicle from the repo man, you may not be able to use it.

Can You Get a Title Loan on a Car That’s Not Paid Off?

There are two primary qualifications for a title loan:

The car title must be in your name
Your vehicle must be paid off and free of liens

Some lenders will offer title loans on cars that are not paid off. That’s a tricky issue that depends on your car loan’s remaining balance and your car’s current market value.

Then, the title loan company will first cover the remaining balance with your original lender and apply the remaining funds to your new loan.

Pro tip: Basically, this means the title lender is refinancing your car loan, and you’re typically refinancing lower-interest debt with high-interest debt. This is a bad idea and will be very expensive in the long run.

Can I Refinance My Existing Title Loan?

It is possible to refinance an existing title loan, but you’ll need to find a lender who will do it. Every lender charges its own fees and has its own terms. So, while refinancing might be a good idea if the new loan ultimately costs less, it will still be expensive.

Is a Title Loan Refinance a Good Idea?

This depends on the new lender, their terms, and interest rates. If the refinanced loan comes with more competitive rates or favorable terms, it might be a good idea to refinance. Refinancing can also be smart if it means avoiding a balloon payment at the end of the current loan’s term.

READ MORE: Title loan refinancing

What is the Application Process for a Title Loan?

The application process is usually fast and convenient. Since most lenders don’t require a credit check, you might be approved for a loan within 15 to 45 minutes. This is true whether you apply online or in person.

If you do choose to apply online, be prepared to finalize the process at a storefront location. The lender will need to inspect your vehicle and verify its condition before releasing any funds.

What You Need to Qualify

Although the title loan process is generally pretty simple, you’ll still need a few things to qualify.

Photo ID: Lenders require a government-issued identification card. This includes a valid driver’s license, state ID, military ID or passport.
Proof of residence: Title loan lenders will also ask for proof of residency. A current lease for an apartment or house, recent credit card statements, phone bills, or utility bills are all valid options. Make sure the name and address on your documents match the information on the vehicle’s title. You should also reside in the state where you’re requesting the loan.
Proof of income: While some lenders don’t require proof of income, it never hurts to have it on hand just in case. Options include: recent pay stubs, an employment offer letter, bank account statements, invoices, and previous years’ tax returns. A W2 or 1099 form could work as well. Some lenders will also accept disability insurance.
Car title: In order to qualify for a loan, the borrower will need to own the vehicle and have the original title. Lenders might also require the vehicle’s registration. Both documents should be in the borrower’s name.
Vehicle inspection: Most storefront and online lenders require an in-person inspection.
Duplicate keys: According to the Federal Trade Commission, some lenders will require a set of keys to your vehicle.

What Kind of Credit Score Do I Need for a Title Loan?

Most lenders have minimal or no credit score requirements. Usually, they won’t check your credit at all.

This means you might still qualify if you have very bad credit or even if you have no credit score at all, depending on the lender.

Pros and Cons of Title Loans

Before taking out a loan on your vehicle, consider the pros and cons.

Advantages	Disadvantages
Minimal requirements	Risk of repossession
No credit check	Extends cycle of debt
Fast cash	High interest rates
Can help if you have a balloon payment you can’t afford	Hidden fees
Could buy you time to qualify for a better loan or earn some extra cash	Exceptionally high cost

Are Title Loans Legal?

Title loans are currently legal in the following states:

Alabama, Arizona, Delaware, Georgia, Idaho, Illinois, Texas, Mississippi, Missouri, Nevada, New Mexico, South Dakota, Tennessee, Utah, Virginia and Wisconsin.

However, they’re illegal in most other states. For instance, a lender cannot legally take physical possession of the borrower’s original title when issuing a loan in Michigan. Many states also ban title loans due to their predatory lending practices and excessively high fees.

Title loans are only legal in certain other states because of loopholes in the states’ laws. For example, California caps the interest rate on title loans to around 30% if they’re $2,500 or less. Because of this, many lenders have a minimum loan amount of $2,500, so they can charge a higher interest rate.

Before applying for a title loan, check the laws in your state, so you know what to expect.

How Many Title Loans Can You Have?

In some states, there is no limit to the number of title loans you can have. However, title lenders won’t give you a second title loan on the same vehicle until the first loan is paid off.

If you have more than one car with a clear title, you can use both cars as collateral for separate title loans.

Who Does Title Loans?

There are several lenders that specialize in title loans. Some have storefronts, and many also offer online loans.

Here are five of the most popular storefront lenders:

TitleMax Title Loans

Up to $10,000
Claims to have competitive APR, but some loans come with 132% APR, or even as high as 184.70%
Variable loan terms ranging from 30 days to over a year
Easy online application followed by an appraisal of the vehicle
Same-day cash (within 30 minutes in some cases)
Late fees and other hidden charges

Here’s an example of a TitleMax title loan:

Loan amount: $4,000
Loan term: 5 months
APR/interest: 9.95% interest or 184.70% APR
Monthly payment amount: $596.48
Total cost: $7,180.31

On BBB, this lender has a A+ rating and is not accredited. There have been 400 complaints in the past three years. Many reviews mention terrible customer service. Others talk about misleading information, hidden fees, and manipulative tactics that led to an extremely expensive loan.

Ace Cash Express

Loan amounts vary by state (ex. $100 to $2,500 in Arizona and $100 to $5,000 in Texas)
397.87% to 497.61% APR
Offers other loans, too, including payday loans
Terms vary by state (specifics available just before agreeing to the loan)
Immediate funding upon approval
Apply in person
Vehicle must be fully paid off, except if you live in Arizona
Available in Arizona, Louisiana, Oregon, and Texas (no store locations in Texas)
Military personnel are not eligible for a loan
Other fees unknown

Here’s an example of a title loan through Ace Cash Express:

Loan amount: $1,000
Loan term: 30 days
APR/interest: 180% APR
Total cost: $1,147.95

For more loan examples, check out this article.

The lender is not accredited by the BBB. On Trustpilot, the business has 4.6 out of 5 stars and largely positive reviews about the customer service. However, there are quite a few complaints.

One reviewer couldn’t close their account and was charged with ever-increasing annual fees. Other reviewers mention scammers using a similar name to the lender.

Speedy Cash

Loans range from $100 to $25,000
Same-day funding available
30-minute application (including in-person vehicular inspection)
Poor credit okay
Repay in installments
Loan terms vary by state
Some states have a minimum principal reduction (ex. Tennessee has a 4% reduction for borrowers who get paid monthly)

Here’s an example loan:

Loan amount: $500
Loan term: 77 days
APR/interest: 438.78% APR
Total cost: $773.01

Speedy Cash is not BBB accredited. Although it has an A+ rating on BBB, the company also has had 400 consumer complaints in the past three years. Most of these complaints are about high costs, hidden fees, and problems closing their account.

Max Cash Title Loans

Up to $25,000 loan amount (some reports of $50,000 for other loans)
Reports of 52% compounded daily interest and 200%-300% APR
1-year to 3-year repayment terms
Customized repayment plan based on lender
Option to refinance the loan
Vague loan terms
Same-day pre-approval and same-day funding are available
Apply online or via phone
Bad credit and bankruptcy are OK
The service is free, but individual lenders might charge other fees
No prepayment fee

Max Cash Title Loans has decent reviews online and is BBB accredited. On Trustpilot, the company has 3.1 out of 5 stars. Since Max Cash only connects borrowers with lenders, the terms, fees, and eligibility requirements differ widely.

Check N Title

Loan amounts up to $50,000 or 50% of the vehicle’s value
201.33% to 265.47% APR
Loan terms vary based on online vs. in-person application
Usually pay in installments
Same-day funding available
Bad credit and no credit OK

Here’s an example title loan with this lender:

Loan amount: $1,500
Loan term: 168 days
APR: 201.33%
Total cost: $2,918.40

Check N Title has 3 out of 5 stars on Yelp. Some reviewers say the lender withholds information and engages in false advertising.

Four Popular Online Title Lenders

Here are four more popular online title loan lenders.

Champion Title Loans

Average loan amounts of $1,000 to $10,000
Loans ranging from $2,500 to $9,999 cap out at 36% interest rate
Customized repayment plan with lump-sum or installment payments
Fast and easy online application
Instant or same-day funding
Offers title loans and personal loans
Amounts vary based on the vehicle’s value, KBB evaluation, and vehicle inspection
Eligibility is based on the borrower’s employment status and credit history
Car, truck, semi-truck, big rig, RV, and motorcycle title loans are available
No prepayment penalties

Champion Title Loans is not BBB accredited and has no online reviews on the site. One location in California has 3 out of 5 stars on Yelp. Positive customer reviews indicate the company is professional, efficient, and friendly. Negative reviews mention sky-high interest rates and poor customer service.

One previous borrower took out a $5,000 title loan and ended up having to pay $350 a month in interest.

Premier Title Loans

Loan amounts vary from 50% to 75% of the vehicle’s KBB value
Pink slip can be used as collateral for larger loans
Online application to get an estimate of the vehicle’s worth
Approval in as little as 15 minutes
Funding within one business day after approval
Repayment period of a few months or beyond
Loan types: online title loans, pink slip loans, no-inspection title loans, auto pawn loans, and alternative financing.
No prepayment penalty

Premier is not BBB accredited but has an A+ rating. The lender has earned 3.8 stars on Trustpilot.

800LoanMart

Loan amounts vary by state (ex. $10,600 in California)
Fast and easy online application with pre-approval
Funds in as little as 24 hours
Flexible repayment plans (few months to 2 years)
Lower interest rate available (with automatic repayment)
No prepayment penalty

Here’s an example loan:

Loan amount: $4,500
Interest rate: 93%
Repayment period: 36 months

800LoanMart is not BBB accredited. Although it has an A+ rating and 4.24 out of five stars, many previous customers indicate the lender is a scam. Some customers also state they’re still having problems with the company years after paying off/closing their account.

24CashToday

Up to $25,000 or 25% of the vehicle’s value
APR ranged from 6.63% to 225%
Nearly instant online title loans
Same-day or next-day funding
No credit check required
Other fees and penalties vary by lender

Although 24CashToday has an F rating on BBB and is not accredited. On Trustpilot, it has 2.9 out of 5 stars, but there aren’t many consumer reviews. The company also isn’t a direct lender.

How Do Car Loans Differ From Title Loans?

Traditional auto loans are loans used to purchase a car. Auto lenders will check your credit score, and you will repay the loan in installments over a fixed number of years. Your car serves as the loan’s collateral. Title loans are short-term loans that use your vehicle’s title as collateral. Your auto loan must be paid in full in order to get a title loan.

Title Loan Scams

Some title loan lenders use legitimate lending practices, but there are a lot of scams, too. Here are the main signs that you’re dealing with a scam:

Unsolicited loan offers
Lack of license
High-pressure tactics:
Late-night repossession
Balloon payments
Requiring unnecessary information
Asking for a down payment or approval fee
Full approval without an inspection or confirmation

Alternatives to Title Loans

Here are some more affordable options to consider:

Glossary: “Signature” installment loans are a type of unsecured loan. Unsecured means that, unlike title loans, they are not secured by collateral. The loan is repaid over a fixed period of time period and paid in monthly installments.

The Bottom Line

If you need money fast, a title loan may seem ideal, but it is almost never a good option. The costs — and risk element — are very high. While payday loans leave you trapped a debt cycle, title loans can leave you with no transportation (and no way to get to work.)

Seek out better alternatives. If you can’t find a way around it, do whatever it takes to pay that loan off on the due date — work extra hours, take on a second job — even sell plasma. But do not assume that a title loan lender will give you leeway. They are not known for generosity.

FAQs

What is the Difference Between a Title Loan and a Payday Loan?

Both are short-term loans that come with extraordinarily high interest rates, short repayment periods, hidden fees and predatory lending practices. If possible, you should avoid both.
However, title loans usually come with lower interest rates and higher amounts. Most title loans have no more than 300% APR, whereas the average payday loan has an APR of 400%.
The average title loan is $5,500, but some lenders let you borrow up to 50% of the vehicle’s value. The average payday loan is $500 and the maximum amount is $1,000 to $2,000.
Both loans have a short repayment period. With a payday loan, you must repay it on your next payday or within two to four weeks. With a title loan, you can either repay it in one month or several months.
Payday loans and auto title loans are extremely risky. Title loans use the borrower’s vehicle as collateral, so you risk losing it if you default on the loan. And, since both loans are expensive, many people cannot pay them back on time.

What is a Virtual Title Loan?

With a virtual title loan, you complete the entire process – from application to receipt of funds – entirely online. That means there’s no need to worry about finding a nearby storefront location.
After applying, the online lender will review your information and appraise your vehicle. You could receive funds that same day if you’ve completed the application correctly.
Online lenders are easily recognizable. Many will have a slogan along the lines of: “No store visit required. We come to you!”

Can I Get a Title Loan With a Co-Borrower?

Yes, but if there’s a co-borrower, both parties will have to fill out the application and sign for the loan. The co-borrower will also need to provide the same information – an ID card, proof of residence, etc. They might also have to go through a credit check if required by the lender.
If the loan has co-borrowers on it, it will show both names on it. If you choose to add or remove a co-borrower later, you’ll need to update the title to show the change.

Can I Get a Title Loan on a Car with High Mileage?

This depends on the value of the vehicle. Some lenders don’t care about the age or mileage of the vehicle, but others do. For the most part, if your car has significant value, the mileage won’t matter much. However, a lower mileage usually means a higher resale value (and potentially a higher loan amount).

Title Loans: What You Need to Know + 9 Lenders to Avoid (If Possible)