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Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. You have money questions. Bankrate has answers. What should I do before I get a car title loan? Before you get a car title loan, consider other choices: Can I get a loan from a bank or credit union? Can I get more time to pay my bills by talking with creditors or a credit counselor? Do I have any money saved that I can use? Can I borrow money from family or friends?
Can I use a credit card instead? How do I choose which way to borrow money? Compare the costs, if you have more than one option. For each choice, find out: what is the APR? Write the answers to these questions. Decide which choice is best for you. I decided to get a car title loan. What should I do? Privacy Policy USA. Also called cash advance loans, they are legal in most states. Or, you authorize the lender to take the loan amount, plus fees, from your bank account electronically.
Payday loans are expensive. The APR tells you how much it costs you to borrow money for one year. Costs increase with rollovers. With rollovers, the cost of the loan grows very quickly. If you roll over the loan several times, you may pay hundreds of dollars in fees and still owe the original amount you borrowed.
Car title loans, often just called title loans, also are short-term loans. They typically last 15 or 30 days. The loans use your car, truck, motorcycle, or other vehicle as collateral.
To get a car title loan, you must give the lender the title to your vehicle. Many title lenders don't even check your credit at all. Unlike an unsecured payday loan, however, title loans are secured by your car or motorcycle title. The lender typically holds on to your car's title until the loan is paid in full. Despite having collateral to secure the loan amount, title loans are significantly more expensive than most alternatives.
In fact, most states don't even allow title loans. How Do Title Loans Work? You can typically start the application process for a title loan online or at a title lender's store. This means it can't be currently financed through another lender. To complete the application process and get approved, you'll need to bring in your car or motorcycle, a clear title, a photo ID and proof of insurance.
You may also need to bring an extra set of keys. While some states require title lenders to run a credit check, most don't. What's more, title lenders don't even need to check your income in many states to make sure you can repay the loan.
Once you sign the contract and agree to pay the loan fees and interest, you'll get your money, and the lender will keep the title until you pay off the debt. That doesn't mean you have to turn over your car—you can continue to drive it as usual during the repayment process, which typically lasts 15 or 30 days, or longer with some lenders.
You can typically make your loan payments in person, through the lender's website or through an authorized automatic withdrawal from your bank account. If you don't pay back the loan on time, the lender can repossess your car or motorcycle and sell it to get its money back.
In some states, if a title lender repossesses your vehicle and sells it, it must pay you the difference between the sale price and the loan amount. Some states, however, allow the lender to keep all the proceeds from the sale. Title loans are an easy way to get cash fast. But they can also intensify your financial hardship if you're not careful.
If your financial situation is already tight, adding fees and interest into the mix can make things more difficult. If you want to avoid repossession of your car but know you aren't going to be able to pay back the loan on schedule, you can opt to roll over the loan into a new title loan.
This, however, only adds to the fees and interest already charged, and can trap you in a vicious debt cycle. In most cases, a title loan won't have any impact on your credit scores. That can be good and bad. For starters, most title lenders don't run a credit check when you apply. That check, known as a hard inquiry , typically knocks five points or less off your credit score. On the flip side, title lenders don't report your payments to the credit bureaus, which means a title loan won't help your credit scores either.
If you're applying for a title loan, you've probably had a difficult time getting credit from more traditional sources. In that case, you want any credit or loans you do get to count toward your credit so you can begin improving your credit scores and eventually qualify for more traditional and less expensive credit.
If you default on your title loan, the lender is required to comply with the Fair Debt Collection Practices Act.
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