A common question when searching for a title loan is can you get a title loan without insurance? The answer is “it depends”. Unfortunately there is not a simple clear yes or no answer.
The fact is that title loans vary from state to state and lender to lender. Also, the type of car insurance also varies (i.e. liability or collision).
To answer the question, we need to look at the factors that go into deciding whether or not to have a title loan without insurance.
Reasons for Title Loans with Insurance
There are a few reasons for requiring vehicle owners to have insurance prior to getting a title loan. The main two are:
- It is a state requirement – there are only two states that do not require car insurance, Virginia and New Hampshire. Unless you live in one of these states it is a requirement to have insurance on any vehicle that is driven.
- Lender Policy – some lenders make it company policy to only lend on insured vehicles. The vehicle is collateral for the loan, so if something happens to it then the value will be reduced.
Now that we know the reasons for lenders requiring insurance, let’s take a look at a couple of use cases for not having car insurance.
Reasons for not having Car Insurance
There are only a couple of use cases for not having vehicle insurance. The first is living in a state that doesn’t require insurance. Virginia and New Hampshire do not, so it is feasible to own and drive a car in those states without having insurance. It is also possible to get a title loan in Virginia with no insurance, assuming the lender does not require it.
The second use case is owning a vehicle that you do not drive, and therefor do not need to insure. In this case, the reason for not driving the vehicle will have an impact on your ability to get a title loan. A few reasons for not driving a vehicle include:
- A vehicle that is fully operational and in storage
- The vehicle is in need of repairs and does not operate
- You have a classic or collector car that you don’t drive
Types of Vehicle Insurance
According to Forbes, there a six types of car insurance. Generally, if you are driving a vehicle, it is a good idea to have some type of insurance. This protects you and other drivers from excessive repair costs in case of an accident. There types of car insurance include:
- Liability insurance
- Uninsured motorist insurance
- Collision insurance
- Comprehensive insurance
- Medical payments
- Personal injury protection
Collision and comprehensive insurance is more expensive than just liability coverage. The extra cost covers other damages from theft, vandalism, and a variety of other circumstances.
What type of Insurance do Title Loans Require?
Out of the above six types of insurance the four that lenders will focus on include:
- Liability insurance
- Collision insurance
- Comprehensive insurance
The type of insurance required for a specific title loan can depend on multiple factors. These include:
- Lender policies
- State regulations
- Loan size
- Other
The lender policies and state regulations usually will vary. This depends on where you are located and which lender you choose for your title loan. The loan size is explained below.
Liability Coverage Insurance Requirement
For smaller loans, the lender and title loan company will have less of a risk should something happen to the vehicle. In these cases sometimes liability insurance is sufficient.
Comprehensive and Collision Insurance Requirement
For larger loans, most lenders will require some form of insurance. The reason is simple – if something happens to the vehicle the insurance company will cover the cost.
Larger loans may require full coverage or comprehensive insurance. This means the lender gets reimbursed should something happen to the vehicle.
Insurance Claims and Lienholders
To get a title loan the lender will require a lien free title. There are a couple of exceptions like a title loan refinance or second lien title loan. Regardless, once the title loan is made the lender will place their lien on the title.
This gives the lender a security interest in the vehicle. If the vehicle is in an accident and is a total loss, then the insurance company will compensate the lender that has the lien.
How to get a Title Loan without Insurance
To get a title loan without insurance the first step is to determine if insurance is a requirement in your state. If not, simply find a lender that offers the best title loans and apply for a loan. If they have a certain dollar cutoff for uninsured vehicles, then they will let you know when you apply.
Summary
Can you get a Title Loan without Insurance? Yes, but only if the lender and state do not require insurance. This is much more common for small title loans. Larger title loans will almost always require some form of insurance.