How Title Loans Work

a bowl of money symbolizing car title loans

Car title loans are short-term loans designed to help individuals with temporary financial problems. These loans are also formatted for those with poor or no credit. Title loans can provide you with the emergency funds you might need when you’re short on cash. The loan is secured by your car title, but your car has to be completely paid for. You will still be able to use your vehicle while you are making your payments.

The Terms of a Title Loan

The average length of a title loan can range between two weeks and one month. Fortunately, credit checks are not associated with title loans, because the title of your vehicle is the collateral for your loan in the event that you are unable to make payments. The amount of money you can obtain from this type of loan will be based on the market value of your car.

Title Loan Interest Rates

The interest rates for title loans are typically a bit higher than the rates associated with other loans. The higher interest rates are a security measure against the risk of providing loans to individuals with low credit scores.

Additional Fees for a Title Loan

Some companies that offer title loans will charge additional fees. These fees can include origination fees, late fees, lien fees, documentation fees, roadside assistance fees, and processing fees.

Your title loan company might also give you the option of rolling over your interest fees or extending your loan. This can help you lengthen the payment term. However, you need to ask if a separate fee will be associated with these features of the loan.

Defaulting on a Title Loan

If you are no longer able to afford to pay off your loan, the lender does have the right to repossess your vehicle. In addition, the lender has the right to sell your vehicle in order to pay off the rest of the loan. This is not always the case. If you are not able to pay back your title loan, it is a good idea to talk to your lender about obtaining an extension and paying a late fee.


While good credit isn’t a requirement for title loans, there are some stipulations to gaining loan approval. Many lenders will make sure that you make a certain amount of money each month before considering you for a title loan. Most title loan companies will only accept customers that have a steady income, proof of residency, and the title to their vehicle.