Car title loans – one good option when you need extra money

Sustaining a stable financial lifestyle is something that we all aim for. However, in reality, not only it is not an easy thing to do, sometimes it is nearly impossible. Even when you carefully structure your budget, calculating your earnings and expenses in advance, you may still sometimes find yourself in a situation that requires you to have more money than you actually do.

Whether it is an emergency or your electricity bill is far more than you expected it to be, the sooner you deal with the unfortunate situation the better. In situations like this, people often turn to the loan lending industry go get financial assistance and pay their expenses. The loan lending industry has grown a lot in the last years. Nowadays, borrowers have plenty of loan options to choose from.

When dealing with an emergency, you cannot really afford to wait for days or weeks to get financial help and so for most borrowers, applying for a standard loan with a traditional loan lending institution is not really a viable option. There is a very popular option among people who own a vehicle, and that is a title loan. Taking out a car title loan can be a great way to deal with an emergency financial situation as it is very fast, rather easy to qualify for and you can use your vehicle as a collateral for the loan. Having more information about your loan options will enable you to make a better choice if you ever have to deal with a tricky financial situation. Below, we will try to explain what car title loans are and how they work.

What is a car title loan?

What is a car title loan?
What is a car title loan?

Car title loans are small-sum, short-term types of loans where the borrower uses his vehicle as a collateral to get the loan. Whether you own a car, a motorcycle or a truck, you can use it as a collateral. The maximum amount of a car title loan is usually between $100 and $5,000. Once you have taken out your car title loan, you must repay the money within the given time period (usually no more than a month). If you are unable to repay the loan on time, you will most likely lose your vehicle. Usually, you have to repay the loan with a single payment at the end of the loan term. However, in some cases you have the option to repay the loan with multiple payments over a longer period of time. Car title loans are quite expensive, so before you consider taking out such a loan, you must be absolutely sure that you will be able to repay the amount on time.

How do car title loans work?

How do car title loans work?
How do car title loans work?

When you apply for a car title loan, you have the option to do it by visiting a loan lender’s physical store or you can submit your auto title loan request from the comfort of your home by visiting a lender’s store online. Once you have found a lender to work with, it is time for you to apply for your car title loan. The application process will require you to provide a certain number of documents. Normally, these documents include:

    • your application
    • your photo ID
    • the title to your car

Some lenders may require you to show a photo of your vehicle or they may want to see it in person before they approve your loan application. There are some loan lending companies that may also require you to give them an extra set of keys. After your loan request has been approved and you have signed your contract agreement, you will get your money as soon as within a day and the lender keeps the title of your car. After that, all you need to do is to repay the loan in full (plus a certain monthly fee) and on time.

How much does a car title loan actually cost?

Auto title loans can be quite expensive as loan lending companies charge a monthly fee that in some cases can be as high as 25% of the whole loan amount that you have borrowed.


If you want to borrow $500 for a period of 30 days, with a monthly fee of 25%, $500 x 25% = $125. That means that after one month for your $500 car title loan, you would have to pay $625.


How to compare costs
How to compare costs

Almost all types of loans have an APR (annual percentage rate). The annual percentage rate of a loan shows you how much that loan is going to cost you for a year. Car title loans have higher annual percentage rate that plenty of other loan options. When you apply for your car title loan, the loan lending company must tell you the annual percentage rate of your loan before you sign any contract. Also, different states have different loan law regulations, so you should get the information about your state loan regulations if you are thinking of taking out a car title loan.


Sometimes, even with all your efforts, you may still not be able to repay your car title loan on time. If this happens, the loan lending company may give you another month to repay the loan. This option is called a rollover. If you rollover your car title loan, you will have to pay another fee at the end of your loan period. If you make more than one rollover on your loan, you would probably have to pay a lot more money than you have originally taken out and eventually you may fall into a debt cycle, not being able to pay that amount. This is why you may want to consider other options for financial assistance like asking some of your friends or a family member to help you out.

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