Car title loans can have a tendency to be somewhat confusing. As a result, often borrowers have many questions. We compiled the most frequently asked questions related to car title loans in an effort to help save time.
The answers are meant to provide more information on how title loans work, associated costs and fees, how different lenders operate, as well as what is required for a car title loan.
We will continue to add to the list periodically when a relevant question gets asked often.
What is a Title Loan?
A title loan is a secured loan that allows you to borrow money using the equity in your vehicle as collateral. This is the shortest and simplest definition, for more details see ‘what is a title loan‘.
What is a Lien Free Title?
One of the key title loan requirements that is mentioned frequently is a lien free title. This means the vehicle is paid for and is free and clear of liens.
A lien is put on a vehicle when it is financed. This can be when purchased new, used, and when getting a title or auto equity loan.
What do I need to Qualify for a Title Loan?
To qualify for a title loan, generally, you will need:
1. A vehicle and a lien free title.
2. Ability to repay the loan.
3. Proof of Insurance.
4. Proof of Address.
5. Government Issued ID.
These are general requirements that are common across lenders; however specific requirements can and do vary. Before applying, you will want to make sure you meet the title loan requirements to make the process go smoother.
Do I get to keep driving my car?
Yes. This is one of the advantages of a title loan. With a title loan you continue to own and drive your vehicle during the loan. Title loans are a great way to use the equity in your vehicle when you need it without having to sell your vehicle. When you pay off the loan, your title is returned to you and the lien is released.
What are Title Loan Maximums?
Each state treats title loans differently and have different maximums. Some states have no maximum amount, some do. Additionally, some lenders have no pre-set maximum title loan amount and others do.
The maximum amount you can borrow will usually be determined by two factors: 1. The value of your vehicle. 2. Your ability to repay the title loan.
Generally, title loans are limited to 50% of the vehicle’s fair market value. So, for example, if your car’s fair market value is $8,000.00, in most cases the loan maximum would be $4,000.00. This assumes you have the ability to repay the loan.
No. In fact, in most cases your credit score does not matter. Your car is your credit with a title loan so good credit is not necessary. Some lenders, particularly online lenders, do perform credit checks.
Make sure to find out before applying if this is something that is important to you. No credit check title loans are widely available.
What is my vehicle’s Fair Market Value?
A vehicle’s Fair Market Value is generally the value a bank would be willing to finance the vehicle for if it were sold at a dealership. There are published guides (Black Book, etc.) that provide estimates of a vehicle’s fair market value by using real data from recent vehicle auction sales.
Because these guides use real data (what similar vehicles sold for at wholesale auctions) they are usually the most accurate and can differ from other online resources like Kelley Blue Book and NADA.
Unfortunately, these guides are usually not always available to the general public for free. Both Kelly Blue Book and NADA provide Trade-in values for vehicles which are usually (not always) close to the Fair Market Value of the vehicle. See the post titled “What is my Car really worth” for more information.
Can I pay off my loan, early, without penalty?
Yes. We encourage title loan customers to pay off their loan as quickly as possible to save on interest. The best car title loan companies do not have prepayment penalties. Make sure the title loan you get has no prepayment penalty.
You can usually make payments towards your title loan at any time and in any amount. As with any other monthly installment loan, by paying early and paying often, you will pay your loan off sooner and save on interest. Learn how to pay off your title loan fast.
Can I get a Title Loan for an older Car or Truck?
Assuming the vehicle has enough fair market value to lend, yes. Typically, to have enough equity to support a title loan, vehicles should be 10 years old or less with less than 100,000 miles.
Getting a title loan on an older vehicle may be a challenge depending on how much it is worth. However if the vehicle’s fair market value is more than $5,000 you can usually find a title loan.
Why is the fair market value of my vehicle different than the retail value?
The retail value of a vehicle is what a dealer charges. This includes a number of costs in addition to the fair market value. The dealer has rent to pay, utility bills, employee salaries and commissions, vehicle repairs and reconditioning, and other costs.
This is the main reason these values differ. Depending on the vehicle, the difference can be significant. When preparing for a title loan use the fair market value of the vehicle to get an idea of how much you can borrow, not the retail value of the vehicle.
Are Title Loans bad?
There is no simple answer to this question. Title loans are great for some borrowers and not so great for others. There are many factors that determine whether or not a title loan is the right decision for the borrower.
The simple answer to “are title loans bad” is sometimes. Unfortunately, not all title loans work out great for every borrower. This is why it is critical to find the best lender and analyze your specific situation. If a title loan does not make sense for you then consider alternatives.
Do Title Loans require Employment?
Some lenders require proof of income and some do not. More important than proof of income is your ability to repay the loan. It does no one any good to make loans that cannot be repaid.
Note that the ability to repay the loan can come from any source and does not need to be from employment. This source can be from regular employment or any other reliable income source.
Are there Online Title Loan Options?
Yes, there are online title loan options including completely online title loans funded within 24 hours as well as same day title loans. There are slightly different requirements for online title loans, so make sure you are able to take pictures of the vehicle.
Can I get a title loan on my Classic Car?
Yes, in fact classic cars make great title loan candidates in some cases. Some title loan companies have year cutoffs, we prefer when the focus is on the vehicle value. Many classic cars have plenty of value and unlike late model cars, they usually do not depreciate.
How Long are Title Loans?
Title loans can be anywhere from a couple of weeks to several years. Some states have 30 day title loans or title pawns, other states have longer loans with monthly installments.
One thing to keep in mind is that the longer the loan, the more interest you will end up paying. Car title loans are short term solutions, make sure to keep the loan as short as possible to minimize costs.
Can I get a Title Loan with no Inspection?
Yes, you can get a title loan without a vehicle inspection if you apply for and get approved for a specific type of online title loan. You will need to find a completely online title loan with no vehicle inspection.
These loans require vehicle pictures to support the online, or virtual, appraisal rather than a physical vehicle inspection.
Do I need a Bank Account for a Title Loan?
While a checking account can make getting a title loan easier, especially an online title loan, it is not a requirement. You can certainly apply for and get funded a title loan without a bank account.
Are there Motorcycle Title Loans?
Yes, borrowing money using your motorcycle title is an option if you own your vehicle free and clear. Motorcycle title loans work the same way car title loans work.
Can you Trade your Car in with a Title Loan?
Yes, just like with a car loan you can trade your car in and purchase a new one. You will need to let the car dealer know that you do have a loan on the vehicle. Additionally, the loan may need to be in good standing for this to occur. Make sure to check your loan agreement and contact your lender.
Is there an Instant Title Loan?
Unfortunately there is no title loan that is “instant” or “60 seconds”. Title loans are very fast, and an instant online title loan can be completed quickly.
All title loans, however, including the fastest title loans do take some time to both process and fund. If time is a critical factor be sure to confirm funding timeframes with your lender. Same day and 24 hour title loans are becoming more common.