Things to Consider Before Getting a Title Loan

a calculator and a hundred dollar bill symbolize car title loans

When looking for a personal loan, one option available to many people is to take out a car title loan. A car title loan is a personal loan secured by the equity that you have in your vehicle. When thinking about taking out a car title loan, read through these advantages and disadvantages of title loans that you need to be aware of to ensure you make the best decision possible.


  • Easy Approval
    Car title loans are easy to gain approval for, particularly when compared to other types of personal loans. When applying for a personal loan with a bank, you will have to go through a very difficult underwriting and approval process, which will include verifying your income and credit score. In most cases, the underwriting process will end with a decline. When taking out a title loan against your car, all you will have to do is prove that you own the car and have equity in the vehicle. Once the lender has a copy of your title on file, approval for the loan is practically guaranteed.
  • Convenience
    An advantage to title loans is they’re convenient. Once you have provided your title, the entire application process can be completed online within minutes. After you’ve been approved, which is completed almost instantly, you can expect the loan proceeds to be deposited directly into your bank account in just a few minutes. Compared to a traditional bank loan, which is far more time consuming, title loans are incredibly convenient.
  • Flexibility
    Title loans can be very flexible. A title loan lender will often offer flexible terms regarding the amount of money borrowed, repayment terms, and other factors, which can make it a better loan product for your personal situation.


  • High Interest Rate
    While there are clear advantages to car title loans, there are some disadvantages as well. One disadvantage is that they can be expensive. Interest rates on car title loans are not as high as unsecured personal loans but are much higher than auto loans. Beyond the high interest rates, there are origination fees and other expenses, which can make them among the most expensive forms of personal loans.
  • Loss of Vehicle
    The main disadvantage of a car title loan is that it could lead to the loss of your vehicle. If you take out a title loan and do not pay it back, you run the risk of losing the title to your car. In most cases, the lender will start pursuing foreclosure of your vehicle if you fall more than a month behind on payments.
  • Credit Impact
    Car title loans can hurt your credit score if used incorrectly. Many people who take out car title loans will take multiple loans out consecutively. This can lead to a lot of inquiries on your credit report, which can negatively impact the score. Furthermore, if you fall behind on payments, you will see a drop in your credit score.