Documents You'll Need
Rates and Fees
Example of a Title Loan
The Bottom Line

Loans Personal Credit

Car Title Loan Requirements
By Kimberly Rotter
Updated May 14 2021
Reviewed by Thomas Brock

An auto title loan is a short-term loan that is secured by the car used by the borrower serves as collateral for the loan. The majority of the borrowers are consumers who do not qualify for other financing alternatives.

If you live in a state that allows car title loans (see States that Accept Car Title Loans), here's how to get one. The borrower takes the car along with the necessary documents and other documents to the loaner. While some title loan applications are online, lenders will need to check whether the automobile is in working order and the accuracy of the documentation before they release the money. The lender holds the title to the car, places a lien on it, and transfers the money to the applicant.

The loan amount is typically 25% to 50percent of car's worth in cash ( The borrower repays the loan with fees and interest in the time permitted (usually 30-days) and is able to claim the title, lien-free.1
Important Takeaways

Car title loans are secured short-term loans which use the car that the borrower is using as collateral.
They are often associated with subprime lendingbecause they typically involve high interest rates and borrowers who have poor credit ratings. and not all states allow them.
To qualify for a title loan you'll have to submit evidence that proves that you're who you claim to be and own your vehicle, that you've earned a living and that you have two references.
Additional steps are sometimes required in order to reduce the risk for lenders, such as installing GPS trackers to the car to assist in potential repossession.

Documents You'll require

To qualify for a car title loan, also called a pink slip loan, in most cases the borrower has to own the vehicle outright and there should be no liens attached to the title.1 Lenders also require certain documents, which include any or all of the following:

Original title of the vehicle indicating sole ownership
Identification issued by the government that matches the name on the title
Utility bill or any other evidence of residence that matches the name on the title
Current registration for the vehicle
Evidence of insurance for the vehicle
Pay stubs from recent pay or other proof of capacity to pay back the loan
Names address, phone numbers and names that are at minimum two valid references
Working copies of the vehicle's keys

Certain lenders will also require a GPS tracking device to be connected to the car in the event of default and the lender is awarded the right to take possession of the car. Certain of these devices are made to allow the lender to deactivate the vehicle remotely.1

It is not necessary to have an excellent credit score to be eligible for an auto title loan. In fact, most title-loan lenders won't examine your credit in any way, since the loan is contingent on the resale value of the vehicle. Also, you don't need to be employed to be eligible for a Title loan.1
Fees and rates

Title car loans are considerably more expensive than traditional bank loans. Rates of interest can differ, however those states in which the interest rate isn't capped typically, it is fixed at 25 percent per month, or 300 percent annually.2 This means that a consumer who has borrowed $1,000 will have to repay $1250 at the end of the thirty days in order to avoid default.

Most lenders charge a lien fee. In states where title lending is not controlled, some lenders charge origination fees, document fees processing fees, key fees or other fees.1 These fees can will add up quickly and can amount to an additional of $25 (or more) on top of fees for 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 for more details, check out: Car Title Loan Limits).
An example of a title loan

Let's say that Maria was recently laid off from her job, and has to work to survive and pay her rent. In a last-minute solution she opts to take out money using a car title loan against her vehicle, which has a current market price of $2,500. The loan provider will extend her a car title loan worth $1250.

When applying, Maria needs to provide evidence that she is the owner of the title (that she owns the car) along with additional documents. The interest rate was advertised as 20percent for the 30-day length of loan however, Maria made the mistake of believing that the interest rate was already annualized. The true annualized interest rate (APR) was actually 240%! --far more than Maria would have accepted knowingly.

At the end of the one month period, Maria was required to pay $1,500 which was significantly higher than the approximately $1,270 she had anticipated. In the face of her dire financial situation, Maria was unable to find the additional $230 and was thus required to surrender the title of her car.
The Bottom Line

The ideal candidate for a car title loan is someone who owns a vehicle outright and is aware of the potential costly loan and has a reasonable expectation of having the money needed to pay back the loan prior to the time when the repayment period expires. If there is no concrete and realistic strategy for paying off the loan, a car title loan can amount to selling the vehicle for only a fraction of its value.

Many borrowers with title loans renew their loans multiple times, which makes the financing much more expensive overall. So, again the most important factor is ability to repay the loan on or before its due date.

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