How do Online Title Loans Work?

posted in: Title Loan Information

Car Title Loans have been a valuable option for many consumers without access to other forms of credit or large savings accounts. As more services are offering online options, so are title loans. This makes getting a title loan online a viable option for most consumers. They are used to bridge short term funding shortages and cover emergency expenses. The industry has been criticized by many; primarily as a result of the practices of some title lenders that do not represent all lenders. We recently published an article detailing the truth about title loan alternatives, because the majority of article published were simply not accurate.

The title loan landscape has changed quite a bit and using research based on statistics from 7-9 years ago is simply not accurate or relevant today. As a transparent lender, we try to provide all customers considering a title loan with accurate information to help them make a decision. This includes to good and the bad related to online title loans.

The Real Truth About Online Title Loans

It seems large financial writers continue to publish incomplete and inaccurate information about online car title loans that categorize all lenders the same. They are doing a disservice to consumers by providing information related to a small portion of lenders; and even worse, portray only the few states offering 30 day loans versus the larger title lending market; and in particular, online title loans. This article will detail how online title loans work; and specifically, how the majority of online title loans work.

Online Title Loan Inaccuracies Frequently Published:

First, lets get a few facts straight because they are important. If you are looking for an Online Title Loan and read it has to be paid within 30 days and has a 300% APR this is simply not accurate. Other articles frequently categorize online title loans as loans that need be be repaid within 30 days. This is not representative of the industry and applies to a group of primarily traditional title lenders in a few states (In person title loans). This may have been true for in person title loans ten years ago; but is not representative of Online Title Loans today.

The other major inaccuracy is the statement that Online Title loans have an APR of 300%. Again, this is true for a much smaller group of primarily in person lenders making 30 day loans and is not representative of the larger Online Title Loan industry. If you are considering an Online Title Loan but need more than 30 days to repay it, not to worry. Monthly term loans make up the majority of online title loans. The Car Title Loan calculator allows you to calculate title loan costs for monthly term loans.

Online Title Loan Application

Every online title loan begins with an online application. The amount of information required by the application is directly related to the type of online title loan. There two main types of online title loans. The first is a loan that begins online and ends in person. These loans are the most widely available and function very similarly to any other car title loan.

The second is a title loan that begins online and is done 100% online. These are newer and offered by fewer companies. They are know as completely online title loans with no inspection. They represent greater risk to the lender and therefore are usually more costly to the borrower. Some are issued by offshore lenders with few or no regulations. Back to the Application process for each lender:

Title Loan Online from Traditional Lender:

The Online application for a traditional lender that offers online title loans is very easy to complete and requires general information about the borrower and the vehicle. The application only takes a few minutes to complete and does not require a credit check.

Completely Online Title Loan Application

The application for a completely online title loan, title loan with no inspection, and title loan with no store visit is a more detailed application. Because there is no inspection involved, there is more risk to the lender and they may or may not require a credit check. The application will require a significant amount of personal information including a number of references. Because the loan is 100% online, you will also be required to provide a copy of your drivers licence, social security number, employer information, and sometimes bank information. Make sure to thoroughly vet the lender and make sure the extra cost of the loan is worth it.

Next Steps:

Following the submission of the application with a traditional lender the approval process is fast and based on the value of the vehicle. You will be contacted very soon after applying to make an appointment to finalize the loan at one of the lender’s locations or a third party that is approved to appraise the vehicle. This portion of the loan does require a short visit to verify the vehicle condition, sign the loan agreement, and receive your funds. It is generally easy and results in a loan with the same costs as a traditional loan from the same lender. It is also funded on the spot.

Following the submission of an Application to a completely online lender, the underwriting process begins. Because the lender will not have a chance to verify the vehicle’s condition or location, this process may take longer and require more information. They may ask for pictures of the vehicle, and may also require printing out their offer, placing it inside the windshield, and taking a picture of the car with the offer inside, This verifies that you at least have access to the vehicle.

To further mitigate their risk, some lenders may check your credit. Make sure to inquire before applying if this is important to you. Once approved, you will complete the loan agreement online and be required to send the vehicle title to the lender. The loan will usually be funded once the lender receives the title. In some cases, this may take more time than anticipated. If fast funding is important to you, make sure to check with the lender before applying.

How Online Title Loans Work – Repayment Terms

How do online title loans work

There is a misconception with financial writers that all title loans are 30 day loans. This is simply not true. In fact, very few online title loans are for 30 days. Most are monthly term loans for 12 – 24 months; and some even longer. While a monthly term loan is generally easier to repay, any loan longer than 12 months can become very expensive, especially if the interest rate is high.

Interest Rates:

Once again, there is a misconception that Title loans all have 300% APR interest rates and 30 day repayment periods. In fact, Credit Karma recently published and article titled “How Online Title Loans Work” stating just that. Apparently they were citing research from Pew Charitable Trusts related to Title loans (not Online Title Loans) using source data from the beginning of the decade. The conclusions made in the article are simply not representative of how Online Title Loans work today.

We can say that without quoting nearly a decade old research because we are a lender in the industry and understand our competition. We charge 8% per month, which is 96% APR. Not even close to 300%. In fact, very few title lenders charge 300% any more, and those that do are usually low dollar 30 day loans that are not offered online. This is not to say online title lenders do not charge very high rates, many do, just not close to 300%. We are one of the lowest interest rate direct title lenders.

Online Title Loan Direct Lenders

Finding a direct lender should be a priority when shopping for an online title loan. A direct lender will be able to provide more definitive answers related to loan terms, interest rates, payment options, and funding time frames. If you are new to title loans we published a detailed guide on how to get a title loan with everything from determining candidacy and finding the best title loan company.


Online title loans have similarities and differences to regular title loans. To get the best rate and terms, you will need to do some research to find the best lender. When shopping for an online title loan, it pays to find a decent lender with a reasonable rate. And, as if we haven’t mentioned it enough already; not all information published on the internet is accurate.