What is a Title Loan, and How Does it Work?


Various means are there to resolve your untimely money needs. A title loan is amongst them. Known to charge high-interest rates, title loans need to be tackled wisely. Learn more about this type of loan in the post.

Title Loan

Title Loan – Meaning And Other Stuff To Know

There are tons of things to learn about title loans. We will start with its basic definition. A title loan is a variety of secured loans wherein the lender provides immediate capital to the borrower in place of a vehicle as collateral. Mostly, lenders ask for the car that the money-seeker owns as it has a high market value. 

Some other key traits defining this loan are:

  • Short-term lending

A title loan is provided for the short term. Repayment is usually due within 15-30 days of title loan approval.

  • High-interest rate and an additional fee

Title loan repayments are pocket-pinching for two reasons; exorbitant interest rates and various additional fees. Interest can be as high as 25 or 30%. Keep in mind that it’s not the upper limit. The processing fee includes paperwork charges, loan origination fees, and documentation costs that can be a 3-digit figure.

  • A small amount

You can lend a huge sum with a title loan. The loan amount is decided as per the current value of your car. The lender will do a market valuation of the vehicle and will only provide 25-30% of the total value.

If the vehicle is very new and hasn’t borne any damage, then you can borrow up to 50% of the total car’s worth. That’s the upper limit. Based upon this, one can borrow as low as $100 and as high as $10,000 with a title loan. It will hardly go beyond that. 

  • Quick processing

Title loan approval isn’t a very lengthy process as not much of the borrower’s financial history is searched through. The documentation processing is also comparatively less. You have a chance to get same-day cash or a check with this loan.

How Do Title Loans Work?

A title loan is a piece of cake if you get it from a trusted source. All you need to do is apply for a loan online, allow the lender to evaluate your car, and wait for the title loan approval.

To make the process a bit more hassle-free, you need to make sure that you own a lien-free car title, have a valid license, and have active proof of ownership. If all these things are sorted out, then title loan approval will happen at the snap of a finger.

Who Should Get a Title Loan?

A title loan is a great way to get yourself out of an ill-timed money crunch. It’s an ideal choice to make for someone who:

  • Has a bad credit history

Title loan lenders aren’t much bothered about your credit history as they have your car or another vehicle as collateral. So, if your credit history is bad and prevents you from lending money via other means, consider taking out a title loan. The lenders will provide you with money even if you have a poor credit history.

  • Need immediate money

Get and grab a title loan when you require financial assistance instantly. As less documentation and processing hassles are required, you might have money soon after you apply for the loan. 

  • Don’t want repayment penalties

If you want to repay the title loan early, then you can do it without any repayment penalties. Many loans impose an early repayment charge on the borrower, but a title loan isn’t a part of that community. So, if you manage to get money for repayment, then you can easily go ahead. 

  • Want to use your collateral

A title loan will keep your car or another vehicle as collateral. But, you still own it and will be able to drive it.

Who Shouldn’t Get A Title Loan

While a title loan is here to help with money, it’s not meant for everyone. You should avoid it for sure if:

  • You’re seeking a long-term and high-amount loan- A title loan is not an option for you if you want to borrow a huge sum of money. The maximum you can borrow is 50% of your actual car’s value. Also, you must not get it if you want more time to repay it. Most title loans have 14-day repayment terms. Some generous ones can give you 30 days for repayment. But, no more flexibility is offered.
  • You don’t have a stable means of income- It’s clear that borrowing money via title loans is going to be expensive. So, don’t get a title loan unless you’ve got a stable income.

Concluding words

Money troubles can come at any time, without any notice. A title loan is an opportunity to resolve this if you have a legitimate car or another vehicle to own. It’s a quick way to fix any money problems, even if you’ve got bad credit. However, be ready to pay high interest.

About the author

Brent Dixon is the owner of E-Crypto News and an early adopter of cryptocurrencies. He is a Book editor- that has edited numerous books on Cryptocurrencies. He has been a writer for more than 30 years. Covering everything from Jazz Music to Blockchain Technology. He currently lives with his wife on Miami Beach, Fl.

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