If you need to borrow money and you already own a vehicle, you might be able to take out a car title loan. However, while a car title loan might get you some quick cash, there are significant downsides to keep in mind.
What is a car title loan?
A car title loan is a type of short-term, secured loan that typically doesn’t require a credit check. Some lenders don’t even require income verification.
To take out a title loan, you’ll give the lender the title of your car (or motorcycle), and your vehicle will serve as collateral.
In return, the lender will give you a small loan that you’ll have to repay in a short amount of time — often within 30 days.
How much can you borrow with a title loan?
Car title loan amounts are typically 25% to 50% of your vehicle’s value. On average, most car title loans are between $100 and $5,500.
Drawbacks of car title loans
While car title loans could get you access to some fast cash, they also come with significant drawbacks. Here are a few to keep in mind:
- They’re extremely expensive. Car title loans can have APRs of 300% or higher — far more than you’d pay with other forms of credit.
- They come with very short terms. Car title loans typically have to be repaid quickly. — within 30 days in most cases. If you can’t repay the loan in time, most lenders will let you roll the debt over into a new loan. But rolling the loan over means paying more fees and interest on top of the amount you initially borrowed — digging you deeper into debt.
- You could lose your car. Your vehicle secures a car title loan. If you fall behind on your payments, the lender could seize your vehicle and sell it — meaning you’ll lose your primary mode of transportation.
Learn More: Short-Term Loans
Personal loans vs. car title loans
If you need money quickly, a personal loan could be a smart alternative to a car title loan.
Unlike car title loans, most personal loans are unsecured, so there’s no risk of losing your car. Personal loans also typically have much lower interest rates and fees than car title loans.
Plus, you could also have up to seven years to repay a personal loan, depending on the lender — making your monthly payments more manageable.
Tip
Unlike car title loans, you’ll typically need good to excellent credit to qualify for a personal loan.
Some lenders offer personal loans for bad credit, but these generally come with higher interest rates — though these rates will likely still be much lower than the 300% APR you might pay on a car title loan.
If you’re struggling to qualify for a personal loan, another option is applying for personal loans with a cosigner.
Not all lenders allow cosigners on personal loans, but some do. Having a creditworthy cosigner could increase your chances of getting approved. Even if you don’t need a cosigner to qualify, having one could get you a lower interest rate than you’d get on your own.
If you’re considering a personal loan vs. a car title loan, here are several points to keep in mind:
Processing fees Document fees Origination fees Title charges Lien fees Late fees | ||
Banks Credit unions |
No matter which type of loan you choose, it’s important to consider how much the loan will cost you over time.
Same-day personal loans
One of the major attractions of car title loans is that you can often get the money right away.
However, there are also several personal loan lenders that offer same- or next-day funding — meaning you could still get the money you need quickly.
Here are Credible’s partner lenders that offer same-day loans or next-day loans:
Credible rating
Fixed (APR)
6.99% - 25.49%
Loan Amounts
$5,000 to $100,000
Min. Credit Score
700
Credible rating
Fixed (APR)
7.80% - 35.99%
Loan Amounts
$1,000 to $50,000
Min. Credit Score
620
Credible rating
Fixed (APR)
-
Loan Amounts
$2,500 to $40,000
Min. Credit Score
660
Credible rating
Fixed (APR)
9.95% - 35.99%
Loan Amounts
$2,000 to $35,000
Min. Credit Score
550
Credible rating
Fixed (APR)
9.99% - 35.99%
Loan Amounts
$1,000 to $50,000
Min. Credit Score
600
Credible rating
Fixed (APR)
11.69% - 35.99%
Loan Amounts
$1,000 to $50,000
Min. Credit Score
560
Credible rating
Fixed (APR)
18.00% - 35.99%
Loan Amounts
$1,500 to $20,000
Min. Credit Score
540
All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | SoFi Disclosures | Read more about Rates and Terms
Other alternatives to title loans
There are also other alternatives to car title loans available. Here are a few options to consider:
- Credit card cash advance: If you already have a credit card, you might be able to get a credit card cash advance from an ATM or your bank. However, keep in mind that credit card cash advances generally charge higher interest rates than what you pay on purchases. You’ll likely also have to pay a fee for the advance.
- Payday or pawn shop loans: Like car title loans, payday loans and pawn shop loans also typically offer immediate loan funding. But this convenience comes at a high price and should be a last resort. These types of loans can charge 300% to 500% APR and come with very short repayment terms.
- Negotiate with your creditors: If you can’t afford your bills, you might be able to negotiate with your creditors. For example, a utility or credit card company might be willing to extend your due date, temporarily reduce your payments, or put you on a payment plan. It doesn’t hurt to ask to see what your options might be.
- Get a loan from friends or family: While this isn’t an option for everyone, asking your friends or family for a loan could help you cover an emergency expense without paying sky-high interest rates and fees. If you decide to ask for a loan, sit down with your family or friends and come up with a repayment plan and agreement that outlines the loan terms. Be sure to stick to the loan terms so your relationships aren’t strained down the road.
If you decide to take out a personal loan, be sure to consider as many lenders as possible to find the right loan for you.
