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.
There are several ways to get quick cash to help you out when facing a financial emergency. One way is with a title loan, a type of short-term loan that uses a paid-off vehicle as collateral. While title loans are useful in a pinch, they should be viewed as a last resort due to their high fees and other costs. Still, if you’re considering taking one out, here’s everything you need to know about these loans.
What a Title Loan Is, and How It Works
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.
Most title loans have a high interest rate. 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.
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 also: How Do Title Loans Work? + 16 Better Options
Five Popular Storefront Title Lenders
With so many lenders out there, it’s not easy to differentiate the good from the bad. Here are five storefront title lenders that are popular but an option you should avoid if possible.
TitleMax Title Loans
- Up to $10,000
- Claims to have competitive APR, but some loans come with 184.70% APR
- 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 D- rating and is not accredited. 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 has 1.22 out of 5 stars on BBB and is not accredited by the bureau. Negative reviews indicate horrible in-store customer service and problems with the service. 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.
On TrustPilot, the business has 4.6 out of 5 stars and largely positive reviews about the customer service.
- 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 324 consumer complaints in the past three years. Most of these complaints are about high costs, hidden fees, and problems closing their account.
MaxCash 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
MaxCash Title Loans has decent reviews online, but it is not BBB accredited. On Finder, the company has 3.1 out of 5 stars. Since MaxCash 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 2.5 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 3.5 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. The lender also doesn’t have any online reviews on BBB, Yelp, or Google.
- 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, 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.
24 Cash Today
- 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 24 Cash Today is not on BBB, it has fairly average online reviews. On TrustPilot, it has 3.7 out of 5 stars, but there aren’t many consumer reviews. The company also isn’t a direct lender.
What is the Average Interest Rate on a Car Title Loan?
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).
Many lenders also charge other fees, including origination, lien and application processing fees. 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 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. After all, many lenders will want reassurance that you’ll be able to make payments on the loan. 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. You’ll need to bring them your car so they can assess its value before they make an offer.
- References: In some cases, you’ll be asked to include one to three references as part of your loan application. Usually, the full name and basic contact information will be enough. Professional references are best.
- Duplicate Keys: According to the Federal Trade Commission, some lenders will require a set of keys to your vehicle.
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!”
What If There are Co-Borrowers on the Loan?
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).
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.
If the lender checks your credit, it will appear as a hard inquiry. This will cause a temporary drop in your score, so it’s best to have fair or good credit before applying.
These are the standard FICO score ranges:
- Excellent credit: 800 to 850
- Great or very good credit: 740 to 799
- Good credit: 670 to 739
- Fair credit: 669 to 580
- Poor credit: 579 to 300
You might still qualify if you have no credit score, depending on the lender.
Pros and Cons of Title Loans
Before taking out a loan on your vehicle, consider the pros and cons.
- Better terms. Some title loans have better terms than other loans. This includes lower interest rates (compared to payday loans), lower monthly payments, and no prepayment penalties. If you already have a title loan, getting one with no prepayment fee can save you money. A title loan can also help if you have an upcoming balloon payment you can’t afford.
- Fast cash. The funds can arrive, at the earliest, the same day you apply and are approved for the loan, in time to help you out of a cash emergency. This is faster than many other loans or new lines of credit.
- Minimal requirements. Most lenders don’t require a minimum credit score to qualify, and it’s easy. Some might not require a specific income either.
- Risk of repossession. If you fail to repay the loan as agreed, the lender could take your vehicle.
- Perpetuating the cycle of debt. If you can’t repay the loan on time, some lenders will let you roll over or renew the loan. This means more fees and interest on top of what you already owe.
- High interest rates. Title loans often come with three-digit APR, so they’re not much better than payday loans.
- Hidden fees. Some lenders charge origination and application fees. Other hidden fees include early prepayment, late payment, repossession and credit insurance fees.
How Much Money Can I Borrow With a Title Loan?
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.
Are Title Loans Legal?
Title loans are currently legal in the following states:
- New Mexico
- South Dakota
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 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 higher interest.
Before applying for a title loan, check the laws in your state, so you know what to expect.
Is a Title Loan Better Than a Payday Loan?
Neither a title loan nor a payday loan is a viable, long-term option. 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-$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.
To learn more about how a title loan can derail your personal finances, watch this video:
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.
Title Loan Scams to Watch Out For
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: If someone comes to your door, calls you on the phone, or sends you a loan offer in the mail, it’s probably a scam.
- Lack of license: A legitimate lender will have a license in your state and be willing to show it to you.
- Pressure tactics: If someone tries to pressure you into signing for a loan without giving you the chance to read through the terms first, they’re not legitimate.
- Late-night repossession: Some predatory lenders will repossess your vehicle late at night if you don’t pay on time.
- Balloon payments: If the loan starts with a reasonable rate but the payment amounts increase over time, it could be a scam.
- Requiring unnecessary information: A legitimate lender will ask for details about the vehicle (year, make, model, mileage, etc.), as well as things like proof of income and references. A scammer might also ask for personal information about your friends or family.
- Asking for a down payment or approval fee: While an application fee isn’t unusual, a down payment is. You should never have to pay a fee if you’re just asking about a possible loan. You also shouldn’t be charged an approval fee.
- Full approval without an inspection or confirmation: If someone offers you money but you haven’t been approved yet, it’s probably a scam. Pre-approval is generally fine, but the offer should be conditional until the vehicle is inspected.
Alternatives to Title Loans
Here are some more affordable options to consider:
Signature Installment Loan or Other Personal Loan
A signature installment loan, or “good faith loan,” is a type of personal loan that relies only on the borrower’s signature as a promise that they’ll pay. Some banks and other financial institutions offer these loans to those with good credit and reliable income.
Signature loans and many other personal loans are unsecured, meaning they don’t require collateral to qualify. Both types of loans have a lower interest rate than title loans. According to Experian, the average interest rate is 9.41%. However, it can be much higher for borrowers with bad credit.
Peer-to-peer (P2P) loans cut out the middle-man and allow borrowers and investors to work directly together. There are several good platforms for P2P lending, including Upstart and Peerform. Interest rates, terms, loan amounts and eligibility requirements vary based on the investor.
Debt Consolidation Loan
A debt consolidation loan lets you combine multiple unsecured debts (high-interest credit cards, medical bills, etc.) into one loan. With a debt consolidation loan, you only have to make one payment a month.
Debt consolidation usually requires a good credit score. Rates vary by lender, but you can expect an APR ranging from around 11% to 25%, depending on your credit. With the best rates, you could end up with a lower monthly payment and even save money in interest and late fees.
A secured loan requires the borrower to put down collateral to secure it. This collateral could be anything from a paid-off vehicle to your home. If you default on a secured loan, the lender can legally take the collateral to try to recover the money they’ve lost.
Your credit score, the value of the collateral, and loan type all affect the amount you can borrow. Although you risk losing your asset, a secured loan usually has a lower interest rate than other loans.
The Bottom Line
Title loans are a last resort option for those who need extra cash to pay off an unexpected bill or cover some other financial emergency, without the hassles of a traditional loan. These high-interest loans are expensive and, since you’re putting your vehicle on the line, they can be extremely risky.
Only take out a title loan if you’ve already exhausted all other options. Otherwise, see if you can instead qualify for a different type of loan, such as a debt consolidation or personal loan.
Many states consider title loans to be predatory due to their high interest rates, short repayment terms, and the fact that they target borrowers with subprime credit. Around 10% of all title loans end with the vehicle being repossessed. Even when the terms appear to be clear, many borrowers end up paying much more for their title loan than expected. Taking out a title loan often leads to a vicious cycle of debt that can take years to escape.
When you apply for a loan, TitleMax will run a credit check. However, most title loan lenders do not run a credit check or report to the credit bureaus. That means the loan will not affect your credit score whether you pay by the due date or not.
Generally, yes. Some lenders, such as 800LoanMart, grant title loans to borrowers who don’t have insurance. However, it’s a good idea to have car insurance to protect your vehicle in case of theft or damage.