Loan Amount is Based on Car Value
The lender inspects your car (or checks its value online) and offers you a loan amount — typically 25% to 50% of your car’s value.
For example:
- If your car is worth $10,000, you might qualify for a $2,500–$5,000 loan.
You Get the Money — But Hand Over the Title
Once approved, you’ll receive the loan funds (usually within the same day). In return, the lender keeps your vehicle title and sometimes installs a GPS tracker or even a remote kill switch on your car.
You Repay With High Interest
These loans often last 15 to 30 days, though some lenders offer longer terms. Interest rates can be sky-high — sometimes 200% to 300% APR or more.
What Happens If You Don’t Pay?
If you miss a payment or default, the lender can:
- Repossess your car without warning
- Sell your car to recover the loan amount
- Charge additional fees for late payments and repossession
You could lose your only mode of transportation — even if the missed payment was small.
Pros and Cons of Car Title Loans
✅ Pros:
- Fast cash: You can get approved and receive money the same day.
- No credit check: Your credit score usually doesn’t matter.
- Keep driving: You can often keep using your car while repaying the loan.
❌ Cons:
- High interest rates: APRs can be several hundred percent.
- Risk of losing your vehicle: Defaulting means losing your car.
- Short repayment window: You might only have a few weeks to repay.
- Hidden fees: Late fees and processing charges can add up quickly.
How Much Do Car Title Loans Cost?
Car title loans are among the most expensive forms of credit. Let’s break it down:
- Loan amount: $2,500
- Monthly interest: 25%
- Repayment term: 30 days
- Total repayment: $3,125 (not including extra fees)
That’s $625 in interest for just one month.
Are Car Title Loans Legal in My State?
Car title loans are heavily regulated or even banned in many U.S. states due to their predatory nature.
States that ban or restrict car title loans include:
- New York
- California (very limited)
- Massachusetts
- Georgia
- New Jersey
Other states like Texas, Florida, and Arizona allow them but require licenses and limit interest rates.