September 17, 2021

A Guide to Auto Title Loans

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An auto title loan is a great way to cash in on the value of your car to help pay for unexpected bills or expenses. Rather than hoping that your credit score is high enough or that your credit history will allow you to obtain an affordable personal loan, an auto title loan allows you to leverage your car to help you get a great loan without worrying about the rest.

What Is an Auto Title Loan?

As the name suggests, an auto title loan is a short-term loan that uses your vehicle as collateral, helping you easily qualify for a loan as quickly as possible. They're ideal in instances where you need cash fast and you don't want to jump through the hoops of securing a traditional personal loan, either because you have poor credit or a credit history with missed or delinquent payments.

With an auto title loan, those with low credit scores — or even those without credit at all — can qualify for a loan up to the value of their vehicle, which will often far exceed the loan amount that they can get with an unsecured loan with no collateral. 

How Do Auto Title Loans Work?

Also known as an auto loan or simply a title loan, an auto title loan is a loan that's backed by the value of your vehicle. The great thing about a title loan is that you can continue to use your vehicle as you work towards paying off your loan, giving you the ability to pay off your debts while your vehicle stays in your possession. Once you pay off your loan, you'll get your title back as if nothing ever happened.

Because they're backed by the collateral of your car, a title loan is typically a large loan with a low interest rate, which is often seen as the best type of loan for those who are trying to avoid the cycle of debt. With a high loan amount, you'll get the funds to meet your financial needs, all with a low interest rate that makes it easy to pay off your loan as you meet your monthly payments.

That said, putting up your vehicle as collateral does mean that if you default on your loan you could end up losing your car. However, with your car as collateral, you'll typically get better rates and more convenient payment terms that you can be comfortable with upfront. As long as you make all your payments on time, you'll walk away with your vehicle and a great loan.

How To Get an Auto Title Loan?

Title loans are one of the most common types of secured loans, meaning that the loan is backed by some sort of collateral — in this instance, your vehicle. That makes them relatively easy to get as long as you own a car with a value that meets or exceeds your desired loan amount. For a common loan amount of a few thousand dollars, almost every modern vehicle fits the bill, and you may even be able to take out a loan of significantly more if you have a valuable vehicle.

While you can certainly head into a local bank or financial institution to see what your options are, most loans today are handled online with convenient applications that you can fill out in just minutes using a computer or your phone. Once your application is submitted, your documents will be reviewed by an agent and a decision will be rendered based on your desired amount, the value of your vehicle, and other inputs such as your income or your credit history.

An offer will be sent back in anywhere from a few hours to a few days outlining the terms of the loan, as well as the interest rate and how much you'll have to pay monthly during the lifetime of your loan. If it all looks good to you, the only thing left to do is to submit your auto title and to receive your cash loan. 

Furthermore, title loans are also offered for other types of vehicles, such as trucks, boats, vans, tractors, and RVs. If it has a clear title, you can use it as collateral to qualify for a title loan.

Why Get an Auto Title Loan?

An auto title loan is one of the best ways to get cash fast without going through the convoluted approval process of an unsecured loan. With your car as collateral, you can get a fast loan for any sort of emergency financial situation or an unexpected expense. Things such as medical emergencies don't always wait for the perfect time to pop up, and an auto title loan may be an ideal way to manage your financial needs without opting for a loan with challenging terms that you may not be able to pay off.

If you have an urgent repair at home and are unable to get a traditional loan in time, you could be jeopardizing your entire way of life. A roof that's on the verge of collapse or a pest infestation is not something you want to put off dealing with, and an auto title loan enables you to take command of the problem while you're able to do something about it. Your loan lets you deal with the issue via one lump sum without significantly stressing your monthly budget. That can help turn an impossible situation into something manageable, and it's why many people turn to title loans in a time of need.

It's not like you can only get a title loan for emergencies. Some consumers opt for a title loan to help them put money down for a house or to start a business. After all, when's the next time that you'll have thousands of dollars just sitting around waiting for you to make a move. With a title loan, you'll get the ability to control your financial future.

Getting Approved for a Title Loan

The great thing about an auto title loan is that they're so easy to get. Aside from the application itself, you won't need much more than a vehicle title to obtain that loan. Keep in mind that you'll need to own your vehicle outright — no leases or vehicles still owned by the bank will be accepted — and that your vehicle will need to be in good working condition. Vehicles that are less than 10 years old are best, though older vehicles can work if it's a desirable or valuable make and model.

You'll also need valid plates, registration and have the vehicle in your possession when you apply for your loan. Your title will need to be clear of any liens or other issues, otherwise, you won't be approved for a title loan. Additionally, the vehicle needs to be under your name. If there are two owners on the title, both parties will need to apply for the loan. 

Beyond that, you may also need to submit some financial information such as proof of income, as well as any outstanding debts you may have. Photocopies of a Social Security card or ID may be required, so be sure to gather all your important information before starting the application process.

Once you have your paperwork in order and submit them along with your application, a loan officer will go through it all and do a thorough check of the documents. If all looks good, your loan will be approved and you may even be able to obtain your money in as little as a few days. 

Should You Get a Title Loan With a Bank or a Lending Company?

Many institutions offer title loans, including banks and lenders online and off. While most people in the past may have opted to visit their local bank as the first step in the lending process, today you're more likely to get a great rate and a much smoother and easier time applying for a loan online. When you shop online, you also have far more options than the loans you may be able to get locally.

Furthermore, when you apply for an auto title loan at a local bank, they'll scrutinize your credit score and credit history in an effort to keep your interest rate or associated fees high — an online lender will often pay more attention to the value of your car than those other metrics. In some instances, you may also find that it's harder to qualify for a loan at all with a local bank than it is to get the same or a better loan online.

Can Auto Title Loans Affect Your Credit Score?

Most loans will negatively affect your credit score because you're taking on more debt against your income, but an auto title loan is different because the loan is backed by your vehicle's title. Lenders won't have to worry about payments with the value of your vehicle sitting in the wings, and that means no negative effect on your credit score. Better yet, a poor credit score won't affect your ability to obtain a title loan, and that can help you start building up your credit score instead of knocking it back.


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