A car title loan is an easy way to borrow money quickly when other sources of credit are not readily available. Other sources including personal loans from a bank, a credit card cash advance, home equity loan, and/or 401K loan. For many, these are not available.
Personal loans from a bank, for example, are very difficult to obtain, even for those with excellent credit. Ironically, this is almost always listed as the number one “title loan alternative” in articles written by some large financial publishers. It is a bit surprising how out of touch they are, and how repetitive their articles seem to be.
The next alternative in these articles is usually a credit card cash advance. Again, unless you have excellent credit and a large available credit line, this is probably not an option.
Luckily, there is an option that does not rely on your credit score or existing available credit. This option is a car title loan. A car title loan can provide quick funding using the equity in your vehicle. So, how much can I get with a Title Loan?
How much will a Car Title Loan give me?
To answer this question, we need to know how a car title loan works. In short, a car title loan is a loan secured by your vehicle. The amount you can borrow is directly related to two things;
1. the value of your vehicle, and
2. your ability to repay the loan.
Title Loans should be a last resort, when the other forms of financing are not available.
Some Title Lenders charge very high interest rates and are not always known for their honesty or transparency. If you do decide to get a title loan, make sure to choose your lender wisely.
Back to the question: How much can I borrow with a Title Loan? The exact answer depends on the state you live in and the lender you choose. The general answer is approximately 50% of your vehicle’s value (assuming you have the ability to repay the loan).
This means if your vehicle is worth $10,000.00, a title loan will give you $5,000.00. Many lenders, and some states, have limits on the amount they will lend. Some lenders have no pre-set limit. If your vehicle is worth $100,000.00, and you have the ability to repay the loan, you may be able to borrow up to $50,000.00.
To get an idea of your vehicle’s value you can use one of the estimating tools available online. Kelley Blue Book provides several values based on the condition of the vehicle. Make sure to perform an honest assessment of your vehicle and use the tool to find out how much your car is worth.
How much can I get versus How Much should I Borrow?
We feel it is important in every article about “how much can I get with a Title Loan” to bring up the more important question that other lenders don’t ask. How much should you borrow? Once we address that, we’ll cover what title loans actually costs; another topic another lenders avoid.
You can find plenty of “how much cash can I get” forms asking you for your information and trying to get you to commit to a title loan. How many “how much will this cost” pages do you find on other lender’s sites? So, back to the important question:
How much Should I borrow?
This is the question you need to ask (and the lender should ask). Forget the “we get you the most for your car!” lines; you need to get the best deal on a loan that meets your needs. Borrowing the maximum allowable amount is not always the right loan amount.
This is especially true when that loans is at 25% per month. You need to analyze your specific situation. Just because you can qualify for a $10,000.00 loan, and the lender tries to get you to sign up for it, doesn’t mean it is the right choice.
We have written before on this topic; to determine how much you should borrow first figure out how much you need to cover your immediate financial need. Then use our title loan calculator to find a loan term that results in a payment you can afford.
Remember you are using your vehicle as collateral for the loan (not just the vehicle title). This means if you default on the loan the lender will likely repossess your vehicle. The chances of this happening increase significantly if you borrow more than you can afford to repay.
Understanding Title Loan Interest and Costs
Title loans are usually simple interest loans that accrue interest daily. This means the sooner you repay the loan the more you will save in interest charges. Monthly installment loan title loans are amortized over the loan term.
Making early and additional payments, as well as paying more than the minimum, will not only reduce the cost of the title loan but will also reduce the term. Do not make the assumption that all title lenders charge the same amount. This couldn’t be further from the truth.
How much will a Title Loan give me? In general 50% of your vehicle’s value. Make sure the amount you borrow meets your needs and you can make the monthly payments. Title loans are a great source of emergency funding when you need it most when used wisely.
They can also be a giant headache if you borrow more than you can afford or get stuck in a loan with a very high interest rate. It is not uncommon for a $2,000 loan to cost over $5,000 to repay. Do yourself a favor and find a lender that charges much less.