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Documents You’ll require

Rates and Fees

Example of a Title Loan

The Bottom Line

Loans Personal Lending

Car Title Requirements for a Loan

By Kimberly Rotter

Updated May 14 2021

Review by Thomas Brock

An auto title loan is short-term loan in which the borrower’s car serves as collateral to the loan. Most of the time, consumers are not eligible for other financing options.

If you reside in a state which allows the use of car titles loans (see States that Allow Car Title Loans), here’s the procedure for getting one. The borrower brings the vehicle and necessary paperwork to the lender. Although some title loan applications are online, lenders will need to verify whether the automobile is in working order and also the completeness of the paperwork – before they release the money. The lender holds the title to the car it, then places a lien over it, and gives the funds to the borrower.

The loan limit is generally 25% to half of vehicle’s total value in cash ( The lender pays back the loan with charges and interest, within the time period permitted (usually 30 days) and is able to claim the title lien-free.1

Important Takeaways

The car title loans are secured short-term loans that borrow against the car that the borrower is using as their collateral.

They are associated with subprime loans, since they typically involve high interest rates and borrowers who have poor credit scores. And not all states permit them.

To obtain the title loan you’ll have to submit documentation that you are who you say you are, that you own your car, that you’ve earned income and that you have two references.

Sometimes, additional steps are necessary to decrease the risk for lenders by installing GPS trackers to the car to aid in a possible repossession.

Documents You’ll Be Needing

In order to obtain a car title loan, also called a pink slip loan typically, the borrower has to own the car in full There are no liens on the title.1 Lenders also require certain documents, which include any or all of the following:

Original title to vehicle showing sole ownership

Government-issued identification matching the name on the title.

Utility bill or any other proof of residency matching the name on the title

Current vehicle registration

Documentation of the insurance company’s coverage for vehicles

Recent pay stubs , or any other proof of capacity to pay back the loan

Names, phone numbers and addresses that are at minimum two reliable references.

Working copies of the vehicle’s keys

Some lenders also require the use of a GPS tracking device to be connected to the car in the event of default and the lender is awarded the right to repossess the car. Some of these devices are made to allow the lender to deactivate the car remotely.1

It is not necessary to have excellent credit score to qualify for an auto title loan. In fact, the majority of title-loan lenders won’t examine your credit in any way, since the loan is based solely on the resale worth of the vehicle. Likewise, you do not require employment to be eligible for a Title loan.1

Fees and rates

Car title loans are considerably more expensive than conventional bank loans. The rates of interest vary, but for states that have an interest rate is not set in a cap, it is generally fixed at 25 percent per month or 300% annually.2 This implies that a customer who takes out a loan of $1,000 must to repay $1,250 at the end of the 30 days to avoid default.

Most lenders charge a lien fee. In states where title lending isn’t controlled, some lenders charge origination fees, document fees processing fees, key fees or other fees.1 These fees can are often high and can amount to an additional $25 (or more) in addition to charges for the loan or interest charges.3 Make sure you add all fees when you are calculating the total cost for the loan.

(For more on this topic, see: Car Title Loan Limits).

Example of a Title Loan

Imagine that Maria was recently laid off from her job and is struggling to pay the bills and make rent. In a last-minute solution she opts to take out money through the car title loan against her vehicle, which has a current market price of $2,500. The loan provider will extend her car title loan for $1,250.

In the process of applying, Maria needs to provide proof that she is the owner of the title (that she owns the car) and additional documents. The interest rate was advertised as at 20% over the 30 day period of loan, but Maria made the mistake of thinking it was already an annualized rate. The true annualized interest amount (APR) in fact was 240%! Much higher than Maria would have accepted in a heartbeat.

At the end of the one month period, Maria was required to pay $1,500 which was significantly more than the roughly $1,270 that she was expecting. Due to her financial crisis, Maria was unable to find the additional $230 and was therefore required to surrender the title to her car.

The Bottom Line

The best candidate for a car title loan is someone who owns a vehicle outright, understands the potentially costly loan and has an expectation of having the cash to repay the loan before the repayment period ends. If there isn’t a clear and realistic plan for paying off the loan, a car title loan could result in the sale of the vehicle for only a fraction of the value.

Many title-loan borrowers renew their loans several times, making the loan much more expensive overall. So, again, the most critical consideration is ability to repay the loan by the due date.

(For more information, see Getting a Car Title Loan.)

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