Car Title Loans


Also known as an auto title loan, this is a type of borrowing where an individual’s car is used as collateral. In such cases, credit checks are not as stringent because the loan is secured by the borrower’s personal asset.

Advantages Of Car Title Loans

Here are some of the advantages:

  • Can be availed even with bad credit. Those who are temporarily stuck with bad credit can try applying for a car title loan where credit score is not the main factor.
  • Ideal solution for short term needs. Auto title loans are typically short term, meaning they can be paid off for 12 to 48 months. There are lenders that allow even shorter repayment periods, such as 30 to 60 days.
  • Fast approvals. As soon as the lender gets their hands on the collateral, which is the car title, approval turnaround times can be very fast.

Disadvantages Of Car Title Loans

  • Higher interest rates. Lenders view car title loan borrowers with higher risk. Thus, higher interest rates go along with auto title loans, at annual percentage rates (APR) ranging from 200% to 300%.
  • Risk of losing vehicle. Of course, defaulting on the loan can lead to car repossession. This must be avoided at all costs because losing a car means lesser mobility and freedom to move around.

Who Should Avail of a Car Title Loan?

Below are some ideal candidates for car title loans:

  1. Individuals who own a vehicle free and clear (fully paid), and with all the ownership documents intact
  2. Those who are temporarily stuck with bad credit or unemployment
  3. Low income earners

What To Consider When Taking A Car Title Loan

Before taking a car title loan, make sure you have already exhausted other means of borrowing. There are other kinds of loans with lower annual percentage rates and does not require risking collateral assets. Having a clear plan on how to repay the debt is also important.

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