What Are Title Loans?
A title loan, also known as a title pawn, is a loan where you give the lender your vehicle’s title in exchange for money. In short, you sign over the title to your car to the lender and they hold it until you repay the loan. Most title loans range from $1,000 to $10,000 and will be paid back over the course of a month, but there are longer repayment plans offered by some lenders.
Most borrowers take out title loans using their cars, motorcycles, or boats. A title loan on any vehicle or asset will usually be for up to 25-50% of the value. The lending company inspects the vehicle and assess its value at the start of the loan process.
Title loans are popular with borrowers with bad credit. They are popular because they do not require a credit check in order to be approved. Title loans are approved based on the value of your vehicle. The one thing to consider is that interest on the loan can be higher than other loans.
To qualify for a title loan, you must have a clean vehicle title. This means that your car’s title cannot have any liens on it. In other words, you cannot owe money to anyone for the car. The car has to be totally paid off.
- Clean title
- Running vehicle
- Proof of income
- Insurance (optional)
- Government-issued ID
The second important requirement is that the car is in good condition. Lenders will need to verify the car, motorcycle, or boat’s main components and make sure everything works before releasing the money.
Besides the condition of the vehicle, borrowers also need to show earned income. However, some lenders are flexible and may approve you for a title loan without income verification. Some lenders will require proof of insurance however, some will not. Lastly, most title lenders will only do business with customers over the age of 18.
Typical Rates & Fees
Title loans or title pawns will have higher interest rates, which will often be written as APR (annual percentage rate).
Interest rates will vary from lender to lender, but interest can range from 25% a month to 300% annually. Besides interest, lenders generally will add on origination fees, key fees, document fees, or processing fees into the repayment amount. These fees can add $25 to $50 to the final cost of the loan.
Types of Title Loans
There are multiple vehicle types for title loans. Let’s look at the three most common options below.
Auto Title Loans
An auto title loan is the most common type of title loan. This is the easiest option for borrowers looking for quick cash and their credit report is not ideal. A car title loan allows you to get the money you need, but still drive off the lot with your car. All you must do is stay on-time with your payments.
Motorcycle Title Loans
You can also get a loan on a motorcycle’s title as well. The process is very similar to a car title loan. The motorcycle needs a clean title and also needs to be paid off. Many people use motorcycle loans to get quick cash for that motorcycle in the driveway not being used.
Boat Title Loans
Motorboats are another vehicle or asset that can be used to get a loan. The same conditions apply as for cars and motorcycles. For boat owners, using the title of their boat might make sense. Some marinas have boats that have not moved in six months. Moreover, boats can also be worth quite a bit of money, which might increase the lending limit.
How to Apply for a Car Title Loan
Most direct lenders offer title loans online and make the initial application process simple. After you fill out your information, the lender will usually ask you to drive the vehicle to the physical location for an assessment. If you’re looking to apply without visiting a store, some lenders will meet you at a mutual location or your house.
If driving to the store is more simple, there are title locations in most major cities and you can easily find a location using our title loans near me locator. Just don’t forget to bring your paperwork and the vehicle for inspection.
Auto Title Loan Laws
Title loans are an easy way to get cash, but there are various laws throughout the country to keep in mind. Differences in state laws may have to do with maximum loan amounts. For example, in Georgia, the maximum loan amount may differ from Florida.
The rules of repossession will differ from state to state. Some states may give the borrower an extra 30 days, while another state may not. Prohibited practices from lenders will also vary across the country like not allowing a balloon payment, which is one very large payment.
“Car Title Loans”, Consumer.gov, 2012, https://www.consumer.gov/articles/1013-car-title-loans