Cash loans on car titles have become a big part of America's lending scene. The loans offer quick cash to borrowers who use their vehicle titles as collateral. These short-term, high-interest loans may appeal to you if you have a financial emergency, but you lack access to traditional credit options.
Bank Rate reports that nearly 5.2% of consumers took out car title loans in 2024, an increase from 3.7% the previous year. The numbers show that many people prefer to acquire these quick funds.
Most people love these loans because they don't consider your credit history and offer fast approval. Before you apply for the loan, you should know what you're getting into.
What Are Car Title Loans?
Auto equity loans are secured, short-term, high-interest loans with little to no credit requirements. They let you get a loan using your paid-off vehicle as collateral.
Apart from cars, you can also use your motorcycles, boats, trucks, and RVs. You can take out a loan of about 25% to 50% of your vehicle's current market value. In return, you give out your car title.
To get your title back, you should agree to pay the loan balance plus fees and interest once the loan term ends.
Why Are People Turning to Vehicle Title Loans?
If you want quick cash, the words "car title loans near me" are probably in your search history. Here is why title loan trends are on the rise:
No Credit Checks
A bad credit score is not a good look if you're a borrower. It stops you from borrowing money from lenders.
If you have bad credit, but still need fast money for an emergency, cash loans on car titles shine the most. You don't have to go through credit checks when you need a loan. With your vehicle acting as collateral, you don't need a good credit score.
Quick Access to Funds
Since the car title loan market doesn't require credit checks, you get the loans faster. It will only take you a few hours to get approval and receive the money you need. All they need to do is review your application and assess your vehicle.
Keep Your Vehicle During the Repayment Period
Similar to other loans that use collateral, vehicle title loans let you use your car while you're repaying the loan. The collateral assures your lender that you will pay up.
As long as you pay what you owe, you can keep your vehicle. You don't have to worry about losing your car.
How Do Cash Loans on Car Titles Work?
The U.S. car loan industry makes title loans relatively easy to get. Here are the steps you can take to make the process seamless.
Bring in the Necessary Documents
You must provide a car title that's solely in your name. If you're co-owning a car, it's illegal to use it as collateral. You should also bring your valid driver's license, proof of vehicle insurance, and the car's registration.
Some title loan companies may want you to bring extra documents, such as:
- Contact information for two references
- A bank statement or utility bill to confirm your current address
- Bank statements and pay stubs to show that you'll be able to repay the loan
You'll also need to activate the car's GPS or install a tracking device. The tracking devices will help your lender find the car if you fail to repay the loan.
Fill Out the Loan Application
With your documents in order, you can apply for a title loan at the nearest company. The application is straightforward.
You'll fill out your name, address, and vehicle information. The questions you answer often relate to the vehicle model and make. You'll also state the amount of money you want to borrow.
The lender may use the Kelley Blue Book to find out how much your car is worth to consider the money you can borrow. Once you sign the application, turn it in and wait.
Choose a Repayment Plan
Different vehicle title loan companies have different repayment plans. If your company only has one option, consider the repayment schedule before you take the loan.
In case you can choose a payment plan, consider stretching out the loan payments. However, you may end up spending more on interest.
Turn Over the Spare Keys and Title
If you accept the loan terms, turn over your vehicle title and spare keys. Don't worry, you will keep your car, at least as long as you make payments. After giving out the title, you get your money.
Frequently Asked Questions
Are Title Loans Legal in Every State?
Cash loans on car titles can be seen as predatory lending. As a result, you will notice there are restrictions in some states.
Some states don't allow them completely. Nearly 33 U.S. states have laws that ban or heavily restrict title loans. However, some lenders operate illegally in these states despite the laws.
In states where car loans are legal, they're subject to capped interest rates that protect customers.
What Happens If You Don't Pay a Car Title Loan?
If you miss any payments, you can make the title loan company repossess your car. Some companies will give you a little grace period, but not all. Once they get your car, they have a legal right to repossess your car and sell it to get their money.
Can a Title Loan Hurt My Credit?
Most of the time, vehicle title loans won't impact your credit. If your lender doesn't run a credit check, you won't have a hard inquiry on your credit report.
In case you default on the loan, your lender also doesn't sell your debt to a collection agency. They only repossess and sell your vehicle. With your debt cleared, they don't report the default.
Getting Access to Cash Loans on Car Titles
Cash loans on car titles are quick and accessible. However, they can be predatory since they can trap you in high-interest cycles. Before you use your vehicle as collateral, carefully consider the interest rates and extra fees you have to pay.
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This article was prepared by an independent contributor and helps us continue to deliver quality news and information.