Why borrowers choose title loans
Your car matters more than your credit score. Many title lenders look mainly at the vehicle's value and your income, so a thin or damaged credit file is less of a barrier than it is at a bank. You keep driving. The lender holds a lien on the title, not the car, while you make payments, so you can still get to work. It can move quickly. Many title lenders review a request faster than a bank does, which matters when a repair or a bill cannot wait. You may be able to borrow more, and over a longer term, than with a payday loan. Because the car secures the loan, amounts can be higher, and in many states title loans are repaid in installments instead of one lump sum.
When a title loan can be a reasonable choice
A title loan tends to work best when several things are true at once. You own the car outright or nearly so. The need is real and short term, such as a repair that keeps you working or a bill that would otherwise bring a shutoff fee. You can see exactly how the payments fit your budget from income you already have. Lower cost options, such as a credit union small loan, an employer pay advance or a payment plan with the company you owe, are not available to you. And your state caps title loan costs or requires installment terms.
How to make a title loan work for you
Borrow only what you need, not the most a lender will lend against the car. Compare the APR and the total cost of each offer, since the APR is the most useful single number for comparing loans. Choose installment repayment over several months when it is available, rather than a single payment due in a month. Read the contract for fees, renewal or rollover terms, and what happens if a payment is late. Ask whether you can repay early without a penalty, and set up payments you can make on time every month.
Know your state's rules
Title loans are allowed under state law in some states and not in others, and the rules differ widely: some states cap the rate, some limit the loan amount or require installment terms, and many set out what a lender must do before and after a repossession. Check the title loan page for your state on this site for its rate cap, its loan limits and where to file a complaint.
The tradeoffs to weigh
Title loans usually cost more than bank or credit union loans, and if you fall behind, the lender can repossess the car under your state's rules. Losing the car can also mean losing your way to work, so weigh that risk as well as the cost. Planning the repayment before you sign is what keeps a title loan a useful tool. BadCreditMD is not a lender or broker. A lending network partner shares requests with lenders. Lenders set their own rates and decide whether to lend.
Related loan rules: Title loans.
Common questions
Can I get a title loan with bad credit?
Often, yes. Many title lenders focus on the car's value and your income more than your credit score. Each lender sets its own criteria and decides whether to lend.
Do I keep my car while I repay a title loan?
Yes. You keep driving the car. The lender places a lien on the title until the loan is repaid, then releases it.
Are title loans better than payday loans?
For some borrowers they can be. In many states title loans allow larger amounts and installment repayment, while payday loans are usually due in one payment on your next payday. Compare the APR and total cost of each offer before you decide.
What happens if I cannot make a payment?
Contact the lender before the due date and ask about a revised payment plan. If the loan goes into default, the lender can repossess the car under your state's rules, so it pays to borrow an amount you are confident you can repay.