Taking a Car Title Loan

Taking out a car title loan is an option that many people take when they are financially distressed. This is often used as a source of emergency funds and it can come in handy under the right circumstances. While it can be beneficial at times, there are also some risks associated with the procedure. Here are the basics of a car title loan and how it works.

The Procedure

The basic idea behind a car title loan is simple. In order to get one, you need to own your car outright. Therefore, it will be difficult to get a car title loan if you are still making payments on the car. You need to find a car title lender in order to get the process started. 

Each lender will run things a little bit differently. However, all of them will have some paperwork for you to fill out. You will give them the basic information that comes with any form. They will need your contact info and any pertinent information about the car. You will also have to provide them with the title to the car. They will not check your credit as the title of the car is providing the guarantee on the loan. 

They will give you the money that you need and you will also usually get to keep the car during this period. They will keep the title and use it as collateral. If you do not pay back the loan, they can repossess the car and sell it with your title if they want. Therefore, it keeps you honest and ensures that they will get back their investment. 


The terms of the loan can be different depending on a number of different factors. The lender will usually have preferred terms that they like to work with. Also, the amount of time that you need the money will also play a factor in the terms. The terms of the loan can range from a week to a month or more. However, there are not many loans out there that will go for much more than a month. These are designed to be short term loans and they do not like them to go any longer than they have to. 

The interest rate that you pay on the money will vary, but it will always be high. The interest on these loans is much higher than what you could expect to pay at a bank. However, those that use this type of loan are usually in a dire situation and it is well worth the extra cost. 


The main risk in this type of loan is losing your car. If you do not repay the money within the terms of the loan, they can come and pick up your car. They can then keep it or sell it to recover the loan money. Therefore, if you undertake a loan in this manner, you need to make sure that you understand what is at risk.