Skip to main content

Title loans are secured loans against a borrower’s vehicle. This means that their vehicle is declared as collateral so that if they fail to pay their loan back on time or in full, the vehicle will be seized. This situation typically applies to around 1 in 5 title loan borrowers in the US.


What is a Title Loan?


Title loans are secured loans against a borrower’s vehicle and have been popularised by around 2 million US citizens every year, who borrow from one of 7,700 US title loan lenders.

Similarly to payday loans, title loans are short-term. As such, you may drive your vehicle in this period of time, but it is likely to be held under your lender’s name until you have repaid in full and on time.

For title loan lenders, the vehicle acts as a guarantee that they will either receive their money back, or receive the collateral instead.


Which US States Allow Title Loans?


At present, title loans are allowed across 17 US states. These include New Mexico, New Hampshire, Wisconsin, Virginia, Utah, Texas, Tennessee, South Dakota, Nevada, Missouri, Mississippi, Delaware, Arizona, Alabama, Illinois, Idaho and Georgia.


Can I Get a Title Loan Even if I Have a Poor Credit Score?


Yes, in many instances you can still receive a title loan if you have a poor credit score, as long as you are the owner of your vehicle. This is because the vehicle will thus act as a form of reassurance of repayment to the title loan lender, so the poor credit score is less relevant.

As such, title loan lenders may not always carry out hard credit checks on their prospective borrowers.


How Much Money Can I Borrow With a Title Loan?


The amount of money that you are able to borrow with a title loan depends on the value of your vehicle. Typically, title loan borrowers can receive loans that fall between 25% to 50% of their vehicle’s worth – averaging on around $100 up to $10,000.


What is a Title Loan?


Do I Have to Get a Title Loan?


There are big risks associated with title loans – especially losing your vehicle. As such, you should research other alternatives available before pursuing a title loan.

These alternatives could include payday loans. Payday loans are short-term, high interest loans that can provide you with funds in a very short period of time – usually under one day. These loans are unsecured unlike title loans so neither your car or home can be seized, including any other collateral of value that you may own for that matter.

You may also want to approach your bank or credit union for a loan. This may be a slower process if you are not already a member or a customer, and will only provide you with a small loan sum. However, this option is worth considering if you do not need not large amounts of funds fast.


What is Better for Me, a Title Loan or a Payday Loan?

Whether you need a title loan or payday loan will depend on your personal circumstances. For instance, title loans could be great for an individual who has a high-value car that can be used, and wishes to borrow a larger amount than a payday loan lender would allow.

However, declaring your vehicle as collateral is a great risk. It may be worth pursuing the payday loan option if you don’t even own a vehicle, or own a vehicle of miniscule value.

Was this article helpful?
Ilana Koffman

Read expert articles from Ilana who has lots of experience in the financial world. Learn from her useful guides on loans, money, savings and lots more.