How Car Title Loans Work?

Loan contracts come in verious forms, ranging from verbal agreements to arrangements that are more complex. You can get them either from your friends and family or from lending institutions that have formal processes.

A car title loan is a usually used to overcome short term financial bottlenecks. Car title loans are generally targeted at people with bad credit ratings. The lender will assess the value of the car and you can borrow a percentage of that value. The lender will typically hold on the title to your car until you pay back the loan. You may also be required to hand over the keys to make it easier for the lender to retain the title of a car, in case you do not pay back the loan.


All you have to own is a car in order to acquire an auto title loan. The vehicle hereby acts as collateral, which is taken over by the lender in case there is no repayment. Nevertheless, you can apply for a car title loan at an online store or a reputable lender.

You need to show all the required documents like the title of vehicle, photo ID and an application. Many lenders may also look at the condition of the car in real-time rather than photographs. Once you have entered the agreement, you must pay repay the loan during the stipulated time.

Interest rates

Since car title loans are commonly used by people with poor credit background, the interest rates are relatively higher than other types of loans. The annual percentage loan must be pretty higher which requires you to enter the agreement carefully. It may even rise up to 300%.

State restrictions

Every state has a different approach towards title loans. Some may impose additional restrictions while others may not. This requires you to check whether your lender complies with the requirement set by your respective government. Make sure the lender is authorized to do so as well.

The benefits

One of the major benefits of this type of loan is the immediacy element. The borrower can get cash on an immediate basis without going through complex formalities. Anyone with a car title can get a good deal of money.

Another benefit with this loan is that you can still use the car. All you have to give is your title and an extra pair of keys, but you still can utilize the car. This makes car title loans more flexible compared to other types.


This is how car title loans work. However, it is not for every person who owns a car. Since the interest rates are comparatively high, make sure you can pay them. It is unquestionably a quicker way to acquire money on loan, but there are some risks associated with it. If you are ready to handle the risks, then surely, car title loans are one of the best ways to get fast money.