7 Things You Need to Know About Car Title Loans Before Applying

how you can reduce your total loan cost

If you own a vehicle, car title loans can be an easy way to get a fast loan for immediate cash. While this sounds enticing, you should know the terms and conditions of title loans and the risks you may be taking.

Thorough Research And Comparison Of Different Lenders

While this may sound cliché, properly understanding your lender, its legitimacy, and its policies is vital to avoid getting scammed or surprised by terms you have not seen before. Some lenders may offer lower interest fees but higher fees. This is why you need to read through the fine print to know exactly what you’re opting into.

If you have bad credit, consider looking up the best online title loans for bad credit. The application process may be easy, and the approval rate impressively fast; however, being informed will give you a sense of assurance, knowing the necessary details.

Interest Rates And Repayment Terms

Car title loans typically charge you an interest rate of 25% per month on the money you borrow. You will also be charged documentation fees, processing fees, and other added costs, eventually increasing the overall expense of your loan.

Most title loan lenders will present you with a repayment duration of 30 days, with some even offering as little as 15 days. Defaulting to pay up within this period may have the lender imposing extra charges on you to cover the cost of your delayed payment. This is why you need to have a budget to ensure a timely payment submission. 

For example, if you borrow a loan of $2,000 with a 25% monthly interest, you’ll need to repay $2,250 plus additional fees after 30 days. These fees can add up significantly and overwhelm you with the total cost, especially if you surpass the payment deadline. This is why it is important to understand your lender’s terms and seek as much information as you can before taking up a title loan.

Your Financial Situation

A 15 to 30-day repayment period may not always give you enough time to secure the funds to repay the money you borrowed. Some title loan lenders might offer you more time to pay while also imposing an additional fee. This fee is called a “rollover.”

The problem with rolling over is that the interest adds up along with additional fees. With each rollover of your loan, your initial costs become larger and larger, and before you know it, you find yourself stuck in a recurring cycle of debt. Possessing an understanding of debt control can help you steer away from this dangerous crisis of still being in debt months after you’ve initially borrowed money.


If you cannot pay your title loan, your lending agency has the right to repossess your car because you put your car up as collateral. Your vehicle may be towed away or an agent sent to unlock your car and drive away with it if you gave them a spare key when taking out your loan. Since the money your lending agency provides is usually limited to 50% of your car’s value when you take out a title loan, your lender can quickly profit by selling your vehicle to the highest bidder.

Insurance Coverage

Most lending agencies will require that your vehicle is adequately insured and continues to be covered during the time you owe them after loaning you money. You may even be required to submit your car’s proof of insurance, the coverage amount, and the details of your car’s insurance coverage. If your vehicle holds enough value to be used as collateral, your lending agency will carefully ensure it’s protected against unforeseen damage.

While they are called car title loans, you can secure this type of loan using other types of vehicles as well, including trucks and motorcycles. You just need to own your vehicle free and clear without any liens. Occasionally, certain lending companies might extend a loan offer to you even if your vehicle loan isn’t fully settled, granted that you have a small balance remaining.

Loan Amount

To determine your loan limit, your lending agency will assess your vehicle based on its condition, age, mileage, features, and current market conditions. You may be able to receive a larger loan if your lending agency finds that your car has a high market value.

Most loaning agencies can offer you a loan of up to 25% to 50% of your car’s value. However, any outstanding payments you owe the agency will be deducted from the total money you qualify for. Do your research and know the value of your vehicle so that you can also estimate the amount of loan you can be eligible for.

Some States May Limit How Much Money Can Be Borrowed 

Did you know that depending on your location, your state’s law may limit the amount of money you can borrow through a title loan? In some states, title loans are not very common, and only a few people rely on them as a financing option. The government in such states makes such laws to protect the consumer.

Other states rule title loans illegal and have banned them due to the loan’s high-interest rates. Before taking out a title loan, it is crucial to understand your state laws and know any loan limits that may be enforced in your location. You should always make informed decisions to avoid getting into trouble with the statutes of your place.


Car title loans are a viable source of quick financial support and should be relied upon responsibly. Title loans can be your easy solution for a short-term loan or some fast cash. You must be smart in your financial decisions and be keen on the details when taking up loans.

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