Documents You’ll Be Needing
Rates and Fees
An example of a title loan
The Bottom Line
Personal Loans and Credit
Car Title Requirements for a Loan
By Kimberly Rotter
Updated May 14 2021
Reviewed by Thomas Brock
The car title loan is short-term loan in which the car used by the borrower is used as collateral for the debt. Most of the time, consumers are not eligible for other financing alternatives.
If you’re in a state that allows the use of car titles loans (see States that Allow Car Title Loans), here’s how getting one works. The borrower brings the vehicle along with all the paperwork required to the lender. Although certain title loan applications can be found online, lenders still need to verify whether the automobile is in working order and also the completeness of the documentation before they release the funds. The lender holds the title to the car and places a lien on it, and gives the money to the lender.
The loan limit is generally 25% to half of car’s total value in cash ( The borrower repays the loan with fees and interest within the time frame that is allowed (usually thirty days) and reclaims the title lien-free.1
Important Takeaways
Car title loans can be short-term, secured loans which use the borrower’s car as their collateral.
They are often associated with subprime lending, as they usually involve high-interest rates and borrowers who have poor credit scores. and not all states allow these types of loans.
To get the title loan you’ll have to submit proof that you’re who you are and you have your own vehicle, you have earned income and have at least two references.
Additional steps are sometimes needed to lower the lender’s risk for default, like installing GPS trackers to the car to aid in a possible repossession.
Documents You’ll Need
In order to obtain an auto title loan, also called pink slip loan, in most cases the borrower has to own the vehicle in its entirety and there should be no liens attached to the title.1 Lenders also require certain documentation, including each of them:
Original title to vehicle showing sole ownership
Identification issued by the government that matches the name on the title.
Utility bill or other proof of residency matching the name on the title
Current vehicle registration
Documentation of the insurance company’s coverage for vehicles
Recent pay stubs , or any other proof of ability to repay the loan
Names, phone numbers and addresses from at least 2 reliable references.
Work copies of the vehicle’s keys
Some lenders also require the use of a GPS tracking device to be attached to the vehicle, in the event that the borrower fails to pay and the lender wins the right to seize the vehicle. Certain of these devices are designed to permit the lender to disable the vehicle remotely.1
There is no requirement for good credit to get an auto title loan. In fact, most title loan lenders will not examine your credit in any way as the loan is based solely on the resale value of the vehicle. Likewise, you do not require employment to be eligible for a Title loan.1
Fees and rates
Car title loans are considerably more expensive than conventional bank loans. Interest rates vary, but in states where the interest rate is not capped, it is generally set at 25% per month, or 300 percent annually.2 This means that a consumer who takes out a loan of $1,000 must to repay $1,250 at the end of 30 days in order to avoid default.
Most lenders charge a lien fee. In states where title lending isn’t restricted, some lenders charge origination fees, document fees processing fees, key fees or other fees.1 These fees can add up quickly, and can amount to more than $25 (or more) in addition to charges for the loan as well as interest charges.3 Make sure you add all fees when you are calculating the total amount of the loan.
(For more information on this subject (For more information on this topic, refer to: Car Title Loan Limits).
An example of a title loan
Imagine that Maria was recently laid off from her job and has to work to survive and make rent. As a short-term solution, she decides to borrow cash using the title of her car loan against her car, that has a current price of $2,500. The loan provider is willing to extend her a car title loan for $1,250.
In the process of applying, Maria needs to provide evidence in the form of a title (that she owns the car) as well as additional documents. The interest rate was advertised as 20% for the 30 day duration of the loan, but Maria made the mistake of assuming it was already an annualized rate. The true annualized interest amount (APR) in fact was 240 percent! –far more than Maria would have accepted in a heartbeat.
By the end of the one-month term, Maria was required to repay $1,500, which is significantly over the $1,270 she was hoping to pay. Due to her financial crisis, Maria was unable to find the additional $230 and was thus required to surrender the title to her car.
The Bottom Line
The ideal applicant for a title car loan is one who owns their own vehicle and is aware of the potential expensive cost of the loan and has a reasonable expectation of having access to the funds needed to pay off the loan prior to the time when the repayment period expires. If there isn’t a clear and realistic plan for repaying the loan or loan, a car title loan can amount to selling the vehicle at only a fraction of the value.
Many borrowers with title loans renew their loans several times, making the loan much more expensive overall. Also the most important factor is the ability to pay back the loan by the due date.
(For more details, refer to Getting a Car Title Loan.)
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