How much you can get for a car title loan depends largely on how much cash your car is worth. Title loan lenders will usually let you borrow between 25% to 50% of the value of your car, and a minimum loan amount can start as low as $100 but go up into the five figures. A title loan usually requires you to hand over possession of your title until you’ve repaid the loan plus interest. If you fail to meet the terms of your agreement, the lender can repossess your car. If you can repay the loan on time, a car title loan as a short-term financial solution is one option. However, you’ll be better off looking into other borrowing choices first, such as getting a personal loan instead.
Emergencies happen. Medical bills, a busted furnace, or an extra expense added to your child’s college tuition can all take you by surprise. This can be a scary time, leaving you scratching your head about how to come up with the extra cash in a hurry.
If you have credit difficulties, it can be challenging to get approved for a traditional loan, and maybe you don’t have an emergency fund to fall back on. Because of this, you might consider a car title loan, where you can get access to quick cash. Which begs the question: How much can you get for a title loan? We’ll answer that question and more as we take a closer look at car title loans and if they’re a sensible option for your financial troubles.
How car title loans work
A car title loan works much like a payday loan — a way of quickly borrowing money with bad or no credit — except in this case you’re using your car as collateral. A lender will assess your car’s value and, based on its worth, come up with a maximum amount of money they’re willing to let you borrow. That figure is usually anywhere from a minimum loan amount of $100 for a low-value car, up to $10,000 or more for newer or more luxurious models. That being said, actual loan amounts can vary greatly by lender and by state.
Auto title loan requirements
The loans are pretty easy to get, although they are not guaranteed no matter what the advertisement says. Title loans often don’t even require a credit check. Basically, you’ll only need the following requirements to file a loan application.
- A valid, government-issued I.D.
- The title to the car
- Proof of ability to repay the loan
Once you’ve filled out the simple loan application (and probably paid an administrative fee), you’ll have your car inspected and the lender will come up with a loan amount. Once you’ve signed and agreed to the terms, you’ll hand over your title for them to keep until you repay the loan. If you fail to make your payments, the lender can seize your car and use the money to cover your debt.
Oftentimes borrowers will have a single repayment date (usually within 15 to 30 days). But if it’s a larger loan, there may be a longer loan term that allows for more manageable monthly payments, albeit with a higher annual percentage rate than you would find with almost any other lending situation.
Calculating the value of your car
There are a number of factors involved in determining the value of your car to figure out the maximum loan amount you can borrow using your car as security for the loan.
- Age of the car. While the age of the car might seem particularly important in determining its value, that number can be offset somewhat if the mileage is low and the overall condition of the car is good, even if it’s 12 years old. Conversely, a relatively new car can be valued at less than expected if it has very high mileage and a lot of visible damage.
- Make and model of the car. The kind of car you drive is obviously one of the key factors in figuring out how much it’s worth. Clearly a base model Honda will command a lower loan amount than a high-end Range Rover with all the bells and whistles.
- Condition of the vehicle. Despite the age, make, and model of your car, its condition is very important in estimating its value for title loan purposes. Obviously, a rusted-out, dented car with a noisy exhaust system is going to get you a smaller loan amount than a clean, ding-free car that runs smoothly.
- Mileage. As touched on above, a vehicle with a ton of miles on it will be worth less than one with low mileage. This is true even if the car is newer because of what it means for the wear and tear on the engine and other car systems. Think about it: would you rather buy a 10-year-old car with 50,000 miles on it or a 5-year-old car with 150,000 miles on the odometer?
- The type of title you hold. Most lenders are going to need you to have possession of a lien-free title as part of the approval process. However, some title types may not be acceptable even if you own the car completely free and clear. For example, if you hold a salvage or branded title your chances of loan approval are greatly reduced.
Pros and cons of car title loans
Though a car title loan shouldn’t be your primary source of financing, this type of loan does come with a few benefits that you should consider. Just don’t forget to consider the risks as well.
Here is a list of the benefits and drawbacks to consider.
- You don’t need good credit for title loan approval.
- The loan application process is quick and easy and can often be completed online in minutes.
- Unlike traditional loans, you can receive your loan proceeds more quickly with title loans.
- There are no restrictions on how you may use the loan proceeds.
- You don’t need to have a job as long as you can show some other form of income.
- This loan is typically a very short-term loan (although some lenders offer longer loan terms).
- They are high interest loans as compared to other options’ interest rates.
- Lenders can seize your car for failure to repay the loan amount.
- If you need to renew your loan because you can’t make the monthly payments, you could wind up in a vicious debt cycle.
The real dangers of car title loans
As illustrated above, there are a lot of risks associated with car title loans (which are often associated with other types of high-risk installment and payday loans). Not the least of which is the potential to find yourself in a lengthy debt cycle if you can’t repay the original loan by the payment date.
They are considered so precarious — and even predatory — that many states have outlawed them altogether. That being said, some lending institutions have found ways to get around that, such as by offering loans online without requiring a physical inspection of the vehicle.
Auto title loans and vehicle seizures
In fact, the Consumer Finance Protection Bureau (CFPB) found, in a 2016 study, that one in five car title loan borrowers have their vehicle seized for failing to repay their debt. Furthermore, the study showed that more than four out of five auto title loans are renewed upon their due date, illustrating that this type of high-interest loan is problematic for many borrowers.
Our study delivers clear evidence of the dangers auto title loans pose for consumers. Instead of repaying their loan with a single payment when it is due, most borrowers wind up mired in debt for most of the year. The collateral damage can be especially severe for borrowers who have their car or truck seized, costing them ready access to their job or the doctor’s office.” — CFPB Director Richard Cordray
Alternatives to car title loans
Before you apply for a car title loan, remember that there are a few other options to consider first. The financing choices below may offer less risk and lower interest rates than car title loans, potentially saving you from a terrible debt cycle.
If you have decent credit and sufficient income, you might be able to qualify for a personal loan. This is a much safer and more manageable option than car title loans or a payday loans — two of the highest interest rate loans possible.
If you don’t think you can qualify for a personal loan, this is a good time to reassess your situation and make some changes toward better financial health. You can also take a look at some personal loans tailored for individuals with a lower credit score, such as those listed below.
Even most credit cards with high interest rates will be better than what you could get with a car title loan. If your car winds up getting repossessed — which is statistically likely — you might no longer be able to get to work.
If your credit score isn’t in the best shape, it may feel like a credit card is impossible to get. However, there are several credit cards available to borrowers with bad credit, which can help you get the financing you need while also improving your credit (provided you make your monthly payments on time).
Borrow money from a friend or family member
It can be tough to ask for money from family or friends. But if there is any way to potentially borrow money from someone you know, it’s better to swallow your pride and make the request than to put your car at risk.
If you’re having such hard times that you are even contemplating getting a title loan, then your ability to repay that loan is probably questionable at best. See if this is a borrowing option before digging yourself into even deeper debt.
What are salvage and branded car titles?
A salvage title is when a car is documented as damaged to the point where an insurance company has written it off as a total loss. Theoretically, the car could still be drivable, but its value is very low and you might even have a hard time getting car insurance for it, much less a title loan.
A branded title simply means the vehicle has been involved in some type of incident that has caused an insurance company to get involved. This designation doesn’t necessarily mean the car was in an accident (although it could be that too). It could also mean the car suffered damage from a falling tree, incurred some water damage from a flood, or was stolen. A branded title won’t necessarily preclude you from getting a car title loan, but you’ll probably need to reveal the basic details of the incident to the lender.
Can I get a loan on my car if I still owe on it?
Most car title loan lenders want you to have a free and clear title to the car before they will lend you any money based on its worth. However, there are some lenders who will allow you to take out a car title loan even if you still owe money on it. But you’ll need to have enough equity built up in the car to qualify.
Keep in mind that just because you technically can get a title loan doesn’t mean you should. With a title loan in addition to your auto loan, you essentially have a second lien on your car. This is just going to make your financial situation that much more precarious.
- A car title loan uses your car as collateral for the loan, meaning a lender can seize it for non-payment.
- The value of your car determines the actual loan amounts you can borrow from a car title loan lender.
- Car title loans are usually short-term, high-interest loans and are generally considered very risky.
- A car title loan can seem very attractive to those with poor credit and very few other options to get ahold of some fast cash.
- Looking into credit counseling and researching other lending options can be a better way to achieve a long-term financial solution.
View Article Sources
- CFPB Finds One-in-Five Auto Title Loan Borrowers Have Vehicle Seized for Failing to Repay Debt — Consumer Financial Protection Bureau
- Car Title Loan Regulation — Consumer Federation of America
- What To Know About Payday and Car Title Loans — Federal Trade Commission
- Car Title Loans — Federal Trade Commission
- What Is a Car Title? Things You Need to Know — SuperMoney
- Pros and Cons of Auto Title Loans (Updated 2022) — SuperMoney
- How to Get an Auto Title Loan Without a Clear Title — SuperMoney
- Do No-Credit-Check Loans with Guaranteed Approval Exist? — SuperMoney
- Fast Auto Loans: The 3 Fastest Auto Pawn Lenders in the Business — SuperMoney
- Ultimate Guide to Auto Equity Loans — SuperMoney
- 2020 Auto Loan Industry Study — SuperMoney
- Speedy Cash Auto Title Loans — SuperMoney
- ACE Cash Express Title Loans — SuperMoney
- Check Into Cash Title Loans — SuperMoney