Five Important Facts About Title Loans

October 19, 2015 - Financial, Lifestyle
Five Important Facts About Title Loans

If you need cash now, you might be considering a car title loan. Be sure that you understand the pros and cons of that type of loan. Here is information to help you make the decision that is best for you.


Car title loans are an attractive option for someone who cannot get a loan from a bank. If your car is paid for, and worth at least the amount that you want to borrow, you can get a loan. The only thing you’re required to do is give the lending company the title to your car along with a set of keys. It’s important to note that the maximum amount the lender will loan you is 25-50% of what your car is worth.


No background checks or credit checks are required to qualify for a title loan, so your credit score will not affect your ability to get the loan. And, you can get your cash within one or two days. Also, you will still have possession of your vehicle, so your daily routine is not disrupted.

Interest Rates and Fees

Car title interest rates are usually much higher than other lenders charge, ranging from 36% to over 100%. Car title companies in some states can charge 25% monthly which is an approximately 300% APR .There are roughly 20 states that allow title loans. These states include:

• Alabama
• Arizona
• California
• South Dakota
• Texas
• Utah

Along with high interest rates, car title companies routinely require the customer to pay additional fees such as:

• Lien fees
• Late fees
• Processing fees
• Documentation fees

Many of the fees charged are legal. Some lenders charge a repossession fee, but this is illegal.

Some lenders have a roadside assistance program that is mandatory, adding more costs for the borrower to pay.


Car title loans are short-term (usually 30-day) loans with high interest rates. Most people are unable to pay them back in full within that amount of time. When that happens, the loan is renewed the next month (rolled over). ”Rollovers” costs the borrower more interest in addition to the amount already borrowed, and can go on indefinitely as long as the company receives payments.


If you miss a payment, the title company has the legal right to repossess the vehicle. Once this happens, they can sell it to make back the money they loaned you. However, if the sale brings in less than what you owed, you may still be held responsible for the balance. When the vehicle sells for more than what you owed, the lender can keep all of the profits from the sale.

It is vital to investigate your options before borrowing money.