Pros and Cons of Auto Title Loans

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Auto title loans are short-term, secured loans that allow you to get fast money using your car as collateral. These loans are determined by the value of your car, so you don’t need to go through the long process of a traditional loan to get one. While this may seem like an excellent way to deal with an emergency need for cash, there are some disadvantages to getting an auto title loan. Here are the pros and cons to give you a better grasp of auto title loans.

Pros Of Auto Title Loans

Based on your needs and credit history, there are some essential benefits to applying for an auto title loan. These include:

1. Easy to qualify

Many financial institutions will need you to have a good credit score to apply for a loan. However, most auto title loan lenders don’t do credit checks, and this is an advantage if you need to borrow money and have exhausted other options available. If you have a running car, you can use it as collateral and get the cash you need even if you have a bad credit score.

In addition, if you repay your auto title on time, this will appear on your credit report and improve your credit score over time. This could be a perfect way to boost your credit if you have poor credit or no credit history.

2. Online applications

Customers can apply for motorcycle title loans online, and hundreds of online lenders offer this convenient service. In most cases, you don’t have to go to a physical location to complete your loan application. You can handle your loan needs from the comfort of your home using a computer or smartphone.

3. Quick money

Since auto loans don’t have credit checks, the application process is usually fast. It only takes a couple of minutes to get approval, and you are likely to have the money in your bank account within 24 hours in most cases. The amount of money you qualify for depends on the value of your car and is often less than your car’s value. If you apply for an auto title loan online, it might take a couple of days to get the money, but it’s stress-free for the borrower.

4. You keep the car

Another great advantage is that you can keep the car and still drive it for the duration of the loan. The collateral is enough to assure the lender that you will hand the vehicle back in proper condition. This increases your chances of finding work or other ways to repay your loan. It also means less risk for the lender, enabling you to be charged a reduced interest rate than if you had gotten a cash advance. However, it’s important to note that your lender might ask you to purchase additional insurance if your current policy doesn’t meet their standards.

5. Access to higher loan amounts

Since you secure an auto title loan with your car, you can access higher loan amounts than unsecured loans. You can borrow up to 25% to 50% of the total value of your vehicle, or even more in some cases. Therefore, an auto title loan may be the best option if you need a large sum of money.

Cons of Auto Title Loans

Generally, auto title loans are likely to benefit the lender. Ensure you understand their downsides before applying for one.

1. Exorbitant interest rates and fees

Due to its short repayment term, an auto title loan has higher interest rates than traditional loans such as personal loans, mortgages, and car loans. In exchange for the lack of credit checks, the annual rate for car title loans can be as much as 300%. This can be quite hefty, especially if you aren’t smart with the amount of money you borrow.

The purpose of an auto title loan is to be a short-term financial solution. You can reduce the interest you pay by repaying the loan early. In addition, make sure you shop around to find the lowest interest rates and understand all the loan terms before choosing a lender.

2. Short repayment terms

Auto title loans usually require repayment within 15–30 days. While the interest rate is low initially, it rises to higher levels every month, and you need the lender to extend it. If you borrow a high amount, it may be tough to repay in a short period. This could mean you will be paying much more than expected.

3. You might lose your car

If you default on your auto title loan, your lender has the right to reclaim your car. Since your loan amount is probably less than the car’s total value, the lender gets more value from selling the car than they would if you had repaid the loan in full. While it’s easy to ignore this risk, it’s advisable only to borrow a loan if you are sure you can pay it off within the given repayment period.

4. No other loan on the same security

Title loan lenders place a lien on your car’s title. This lien is recorded at your state’s motor vehicle administration, meaning you will not be able to get another loan for your car until you repay the loan.

5. Legal in only limited states

An auto title loan is only legal in 30 states in the US. That means you will have to travel to another state to secure a loan if you live in a state that doesn’t authorize the borrowing of this type of loan within its borders. A better option is to apply for an auto title loan online.


Auto loans are a quick and easy way to get money, but they should only be used as a last alternative. The loans are risky due to their high APRs and short repayment terms, which make them difficult to repay and increase your risk of repossession. However, if you have to get an auto title loan, make sure you check out several lenders and get the best possible deal. In addition, make sure you are aware of all the loan agreement terms.