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What you need to know to get a hassle-free title loan approved

Title loans are also called car title loans, secured loans, or secured loans. They are often characterized by a short repayment period and a low loan amount. Unlike other types of loans, title loans use your vehicle as collateral. When applying for a car title loan, some lenders typically skip the process of credit checks or asking for proof of income or employment, even when the consumer may have a bad credit history.

Like most loan options available to people with bad credit, the heavy consequences and high costs often overshadow the good part of these loans. If you’re considering applying for a title loan, you should know how they work, which we’ve detailed below:

How car title loans work

When looking for how to get a loan, you will probably come across different platforms offering these services. However, the main question is how to know the safe and legitimate options? Legit companies usually have a notable online presence and a physical office. They often require valid photo ID, proof of insurance, and your vehicle title as compensation for the requested loan. Sometimes the lender may ask you to provide your spare set of keys for your car. Their typical payment structure is often between 15 and 30 days, and you can keep your car throughout the repayment process.

If you fail to pay the debt before the stipulated time, you often have the option of rolling over your existing car title loan to a new one at the cost of higher interest. Failure to pay can cause the lender to seize your vehicle and sell it to cover the amount you owe. Before applying for the loan, it is best to use a title loan calculator for the estimated loan repayment and interest charges. Due to the high interest rate of title loans, in some US states they are completely prohibited. In others they have a maximum interest rate cap while in some there are no regulations governing them.

The amount you can borrow

Typically, lenders will offer 25-50% of your car’s value, and the loan often ranges from as little as $100 to higher numbers like $10,000. However, the figure varies depending on the lending company. Reimbursement is made online, in person, or through an automatic payment plan from your provided checking account.

Do car title loans affect your credit score?

In most cases, car title loans do not affect your credit score, as there is usually no credit check when applying. Most lenders won’t notify the credit bureau of your payment, and if you don’t repay the loan, they’ll repossess your vehicle and sell it rather than going to a collection agency.

Advantages and disadvantages of car title loans

Like all financial products, home loans have advantages and disadvantages. Here are some points to consider:


  • Easy to qualify: Regardless of your credit score, you may qualify for a title loan as long as you are able to present your car’s title as collateral and you have sufficient income value that meets the requirements. from your lender.
  • Fast approval process: Title loan applications usually don’t take long because they don’t do a credit check.
  • Quick access to cash: If you meet all the necessary conditions, you can leave the lender’s office the same day with cash.


  • You could lose your vehicle: The worst possible scenario with a title loan is that failure to repay the amount borrowed will result in your vehicle being seized by your lender. Based on the findings of a publication CFPB report (Consumer Financial Protection Bureau), 20% of people who get a car title loan often lose their vehicle due to their inability to repay the debt.
  • High interest and additional charges: Even when repaid on time, car title loans have a higher interest rate than other loan alternatives. This is often because lenders accept bad credit. Late payments also incur additional fees and interest that can make the loan difficult to repay.
  • You can easily get into a difficult situation: According to the CFPB, more than 80% of people who take out title loans get a new loan once the first one falls due because they can’t repay the first one. More than 50% of people who apply for car title loans end up taking back-to-back loans up to four times before they can pay off the debt. Each new loan adds additional fees and interest that can further increase your debt.

Although car title loans are an easily accessible way to borrow money in the short term, it is essential that you understand everything there is to know about this type of loan.