Title Loan Refinance: What You Need to Know

If your title loan payment is due and you can’t afford to make the payment, the risk of losing your car is high.

But refinancing your original loan could offer a clean getaway. Here’s what you should know.

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How to Refinance a Title Loan

Refinancing means replacing a current title loan debt with another to get different terms. You can either refinance with an existing title loan lender or find a new lender with better terms. The option that will work best for you will depend on the amount of time you have, your financial situation and your credit score.

Refinancing Through a Traditional Lender

If you have a few days before your title loan is due, apply for a different type of loan. There are bank options, credit union options, peer-to-peer lending platforms and even apps that allow you to access your paychecks early.

You can use a personal loan with no minimum credit score requirement, or you could borrow up to $1,000 with a Payday Alternative Loan. Both of these options will have more competitive rates and longer repayment terms, so you won’t have to repay the money in a single lump sum.

You also won’t be at risk of having your car repossessed if you can’t make a payment by the due date.

Refinancing Through a Title Lender

The process to refinance a title loan is like inquiring for a new one and usually takes three steps:

Inquire for a refinanced title loan
Submit paperwork
Sign a new title loan contract

A portion of the money included in your approval will help take care of the remaining balance of the existing title loan. After the details are completed and the refinance process is finished, you can begin by repaying the title loan and begin the added terms.

Not all states allow title loan refinancing, so you will need to review your state’s laws or consult your title lender to learn whether your state has any restrictions in place.

Ask for a Payment Plan

If you can’t afford to repay your loan in full, contact your title loan lender and ask about a payment plan. Though partial payments typically won’t prevent a lender from repossessing your car, many lenders are willing to work with you if you contact them and make updated arrangements before the due date. Some will allow biweekly payments, while others may require you to roll your loan over into a new title loan with different loan terms.

Refinancing Title Loans vs. Refinancing Traditional Car Loans

There are different types of auto loans. Traditional auto loans require you to make fixed payments over a longer period of time, and when the loan is completed, you own the vehicle. Title loans are typically repaid within 30 days and require a clear title (in other words, you have to have already paid off the car) to be eligible. Refinancing a traditional car loan will require a credit check and a more-complicated application process. Your payments will be reported to the credit bureaus.

Refinancing a title loan could require credit checks and applications if you’re refinancing it to a more-traditional loan. If you’re refinancing an existing title loan with a new title loan, it will be a very simple process, requiring only a new set of fees, a copy of your vehicle’s title and, possibly, a new vehicle inspection. Title loans aren’t typically reported to the credit bureaus, so they won’t help you build credit.

Can You Refinance a Title Loan for a Motorcycle or RV?

Title loans work for all types of vehicles, and you will use the same application process for RVs and motorcycles. That means the same refinancing rules will work as well. It also means that if you don’t repay your loan, your RV or motorcycle can and will be repossessed.

What is the Average Interest Rate on a Car Title Loan Refinance?

The typical annual percentage rate (APR) on a title loan is about 300%, according to the Federal Trade Commission. Refinancing typically charges the same interest rate. However, you’ll likely have to pay additional fees, which will vary depending on whether you’re refinancing with a different lender or rolling over an existing title loan into a new loan.

If you refinance using a different type of loan, you can often qualify for an interest rate of 36% APR or less.

What Do You Need to Refinance Your Car Title Loan?

You’ll need the following documents:

Title loan agreement
Government-issued photo identification (your driver’s license should suffice)
Proof of residence
Proof of income
The car title

In addition, the lender will inspect your vehicle to assess its value.

What If There are Co-Borrowers on the Loan?

If you are applying for a loan with a co-borrower, both borrowers’ names must appear on the vehicle’s title. If you are refinancing an existing loan that has a co-borrower and you are converting it to a single-borrower, the title will need to be updated to reflect the vehicle’s updated ownership.

Can You Refinance a Car with High Mileage?

A car with high mileage is always worth less than a comparable vehicle with lower mileage. More miles often mean there’s more wear-and-tear and more maintenance and repair costs, so you’ll likely be offered less money. Make sure you know your car’s current market value before applying for any title loan or refinancing an existing loan.

What Credit Score Do You Need to Refinance a Title Loan?

Some lenders will offer personal loans to borrowers with minimum credit scores of 560, or a handful have no minimum credit score requirement at all. Credit scores are not a factor at all for Payday Alternative Loans.

And title loan lenders don’t check credit at all. Title loans are a lot like payday loans: short-term loans that have few to no credit requirements but charge incredibly high interest rates. They target borrowers with bad credit. Because your vehicle serves as collateral, many title lenders won’t check your credit at all.

Pros and Cons of Refinancing

Benefits

Better terms: A new loan may have lower interest rates and lower monthly payments
Helps if you have a balloon payment: If you’re facing a large payment you can’t afford, refinancing your existing title loan can help you avoid losing your car.
Lower interest rates: If you’re paying a 300% APR for a title loan and can refinance using a Payday Alternative Loan with an interest rate capped at 26%, it will save you quite a bit of money
Lower monthly payment: If you can refinance using a loan with a longer repayment term, your payments will be lower and it could free up some flex in your budget
You might qualify for a cash-out refinance: Since your car is paid off, some lenders might offer you a cash-out refinance — which will help you pay off your title loan and borrow extra cash based on your car’s market value

Drawbacks

Costs: Auto refinancing can include a variety of costs, including application fees, origination fees and title transfer fees. However, not all lenders charge the same fees, and some may not charge any at all
You might pay more interest: Getting a lower interest rate will save you money, but you may end up paying more overall in interest costs depending on the life of the new loan
Repossession: The potential to have your car repossessed is the biggest risk with any title loan — ask yourself if you can get by without your car

Is Refinancing a Title Loan a Good Idea?

It depends. If you’re stuck with a title loan and have no way to repay it, refinancing your existing loan might be the only way you can keep your car.

However, it’s best to first explore lower-interest refinancing options, including Payday Alternative Loans and personal loans.

The Texas Office of Consumer Credit Commissioner recommends that you ask yourself these questions before any title loan or title loan refinance:

Do I need to borrow this money?
Will I be able to back the loan in full when it is due?
Can I manage my bills and repay this loan?
Can I afford late charges if I miss a payment?
Do I have other credit options?

How Do Auto Title Loans Work?

You visit the title loan company with your vehicle, along with the vehicle’s title. The lender will assess the vehicle’s value and offer a loan based on a percentage of that amount. According to the Pew Charitable Trusts, the average title loan amount is about $1,000. The entire process can take less than an hour, however, the lender holds your vehicle title as collateral until you’ve repaid the loan.

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 Much Money Can You Get With a Title Loan?

You might be able to qualify for a loan worth up to 50% of your vehicle’s value. Factor in loan costs and the risk of losing your transportation when deciding if a title loan is a good idea.

The amount of money you can receive with your loan depends on the value of your vehicle used for collateral.

Military Borrowers and Title Loans

The Federal Military Lending Act of 2006 requires that the annual interest rate for military borrowers cannot be higher than 36% APR. It also prohibits lenders from securing a loan via personal check, wage allotment, debit authorization, or any loan to buy a motor vehicle when the credit is secured by the motor vehicle purchased. Because of these stipulations, most title loan lenders can’t or won’t accept an application from anyone currently serving in the military.

Title Loan Repayment Statistics

According to the Texas Office of Consumer Credit Commissioner, of every ten people who get a new single-payment auto title loan:

Two will pay the loan on time as scheduled (typically 30 days)
1½ will renew 2 to 4 times before paying off the loan
Six will renew 5 or more times or will never pay off the loan

5 Ways to Escape Your Title Loan Without Refinancing

Negotiate with your lender
Get a cheaper vehicle
Default
File for bankruptcy
Refinance or consolidate your debts

More Title Loan Alternatives

Personal loan
Peer-to-peer lending
Credit card balance transfer
Ask friends or family for help
Ask about overtime hours or get a side hustle

The Bottom Line

Refinancing a title loan may be necessary for you to prevent your car from being repossessed. But it tacks extra costs onto an already-expensive loan. Try more flexible refinancing options like Payday Alternative Loans or personal loans before making a return visit to your title loan lender.