What Do You Need for a Car Title Loan?


When you find yourself in a cash crunch, whether you need to make an urgent purchase or pay bills, you may be tempted to apply for a short-term loan. One type of short-term loan is a car title loan.

Before you go forward, know what you need to apply and the conditions of this type of loan agreement.

What Do You Need for a Car Title Loan



A car title loan is an arrangement between a title lending company and a car owner. The lending company provides the borrower with cash in exchange for ownership of the car title until the loan is repaid. The title lending company checks the blue book value of the car to determine how much the company can lend.

If the borrower fails to repay the loan, the title company takes ownership of the car per the agreement. A car title loan is similar in concept to a standard short-term payday loan, which the borrower must repay in a matter of weeks.


Free and Clear Title

One of the items a borrower needs to get a title loan is a free and clear vehicle title. If there is a lien holder on the title, such as a bank, a potential borrower cannot use the car as security for this type of loan.

The applicant must own the car and have the actual title in his possession to present when applying. The lending company commonly holds onto the title until the borrower repays the loan.


Checking Account and Job

To qualify for a title loan, the lender needs assurance that the borrower can afford to repay the money. So the applicant needs a consistent job and must verify his income in order to apply for a car title loan.

In some cases, the car title lending company also requires the applicant to submit a canceled check or a checking account routing and account number in order to secure a title loan. The lender can then withdraw the required payment from the borrower’s checking account.



Car title loans come with a number of risks and warnings. For one, the interest rate on a car title loan is extremely high compared to a standard loan. Though the interest rate the lender quotes seems reasonable at first, when you calculate the annual percentage rate, the cost of the loan can climb well past a 100 percent interest rate.

You also risk losing your car. So consider all possible alternatives before settling on this high interest, high-risk loan, such as a small loan from a loved one or a small loan from a credit union.

You can also create a budget and make temporary sacrifices (such as canceling cable service for a month) so that you can save and avoid the need for this expensive type of loan.



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