How Car Title Loans Work

How Car Title Loans Work signWhat are car title loans? Well, these are loans in which you give your lender the title to your vehicle. Car title loans are typically repaid within a period of thirty days but can  be more in some cases. In many circumstances, you also have to pay a fee to the lender when taking the loan. When applying for this loan, it is important to understand how it works and what is involved. In this article, we will discuss how car titles loans work to help you make an informed decision whether or not to apply for such a loan. Read on to learn more.


If you want to get a car title loan, you must meet the following requirements;

  • You must be employed
  • Your vehicle must be insured
  • Your car should not have any liens
  • You must be able to provide your vehicle’s registration details when you are applying for the loan

How car title loans work

How your car title loan will work will mainly depend on which lending company you will use. In most cases, your company will let you keep the vehicle as they wait for you to repay them, while in some cases, the company may want to keep the possession of your car until you repay the amount.

Once you apply for the loan, your lender will request you to take the car and the title to them. They will then check your documents, and inspect the value as well as the condition of the vehicle. In most cases, you may get up to fifty percent of your vehicle’s resale value.


Depending on the terms of the agreement with your company, you may be required to repay the cash in a lump sum or just interest payments, if you are not able to pay the whole amount. The interests rates levied on these loans are typically very high (i.e. 25% per month), and may cost you up to 300% on an annual basis.

If you get the loan and are not able to repay it within the agreed period, you can usually pay a one-time interest fee and roll over the loan once more to the following month. If you fail to repay the whole sum in next month, your lender has the ability to take away your car and sell it to raise their money.


  • You do not need to have an excellent credit rating
  • It is easy to get the loan when you need it
  • It involves fairly small loans, which are easier to repay


  • Your car will be taken away if you fail to repay the loan
  • The interest rates charges are very high
  • The car title must belong to you


We strongly urge you to consider other options before getting a car title loan.  If you fall behind, you risk losing your transportation, and one of your most valuable assets.  Learn about what the FTC says about car title loans.