How Much Can I Get For A Title Loan?

Life isn’t easy, nor is it fair. Not everyone is lucky enough to be wealthy or even have a decent credit score, which means, for some, trying to secure a loan can feel like an exercise in futility.

How Much Can I Get For A Title Loan

Without that perfect credit score, most lenders of traditional loans simply won’t give you the time of day.

All the while, your financial situation is becoming more and more desperate… enter the title loan!

Less reliant on credit scores, the title loan can be a critical lifeline for those suffering through pecuniary hardships, but before you apply for one, it’s important that you know the parameters of such an agreement, especially the amount you’re liable to receive.

What Is A Title Loan?

In a nutshell, a title loan is a short-term borrowing agreement with property – usually an automobile – put down as collateral.

Being that this property is backing the loan, lenders rarely feel the need to do a credit check, giving this loan format an incredibly high approval rate.

The only real restriction in place is that you must have equity in the proposed collateral. In other words, you must own the vehicle in full.

If you’re currently paying back any loans pertaining to the purchase of the vehicle, it can not be used as collateral for a title loan.

Title loan terms tend to run between 15 and 30 days, but in some cases, a year-long contract will be hammered out by willing lenders.

How Much Will You Receive As A Title Loan?

The sum of a title loan is largely determined by the value of the property you’re putting down as collateral, but there are ceiling limits to the loan, limits that can differ from lender to lender.

Typically speaking, you’ll be able to borrow between 25 and 50% of your vehicle (or other property) value, which usually falls between $100 and $5500.

That said, certain lenders are willing to lend up to $10,000 if the borrower owns a more expensive automobile.

How Do Title Loans Work?

To get the ball rolling on a title lending agreement, you must first prove ownership of the property you intend to use as collateral.

Once ownership has been established, the lender will send a professional appraiser to assess the value of the property in question.

How Do Title Loans Work

Next, you’ll receive the details of their offer. Should you sign on the dotted line, the lender will then put measures in place to ensure they can seize your property if you fail to repay the loan.

They will keep the title or deed of the property, but the property itself stays with you.

If you’ve put a vehicle down as collateral, as is often the case, the lender may stipulate that a GPS tracking device be installed or that a copy of the keys be cut for them to keep hold off during the repayment term.

Benefits Of Title Loans

Title loans are quite a popular option for a number of reasons:

No Credit Checks

It’s rare that a title loan lender will check an applicant’s credit score, as the debt is secured by the borrower’s property, which is always more valuable than the sum of the loan.

This means that if you’ve been denied a more traditional loan due to poor credit history, you can still seek financial aid.

Quick Application Process

Granted, you’ll have to wait for the appraiser to do their thing, but compared to traditional loans, title loans have a lightning-fast application process, a big win for those who are in a time-sensitive financial predicament.

You Get To Keep The Property During The Term

As mentioned earlier, you don’t hand over the collateral of a title loan to sit in escrow in the same way you would with a larger, long-term loan.

You keep the property until you fail to make repayments.

Drawbacks Of Title Loans

While the title loan can help you out of a sticky situation in the present, there are many aspects of this kind of agreement that will hold you back in the future.

High Interest Rates

Title loans are some of the most expensive on offer in the US. The average annual interest rate of a title loan is roughly 300%, which, needless to say, is nuts!

That equates to around 25% interest on the borrowed sum per month.

For example, let’s say you took out a title loan of $1000 dollars against your vehicle. If the repayment term is 30 days, you’ll be paying the lender a whopping $1250 at the end of the month.

It’s likely you’ll also be paying various other expenses alongside the standard interest rate, so the final figure will be even more shiver-inducing.

Perpetuate Cycles Of Debt

It’s common for lenders of title loans to roll the debt over into a new loan agreement if the borrower cannot keep up with repayments, and the terms of these new agreements tack on additional fees.

Even if the interest rate remains the same, you’ll still be left out of pocket, as you’ll be paying yet another $250 to the lender at the end of the second month, amounting to $500 in total, $500 that you desperately need.

Benefits Of Title Loans

This perpetual cycle of debt more often than not amounts to the borrower paying more in interest and fees than the amount of the initial loan, so, a title loan rarely makes much sense from a financial point of view.

Property Repossession

In a title loan agreement, the collateral is always on the line.

Should you fail to keep up with repayments, it will be seized by the lender, and you will not receive any of the payments you have made back.

In this case, it would have been much better to sell the property in the first place, as at least then you’d get the full value price for it rather than 25–50%.

What Alternatives Do You Have?

Title loans are popular because people feel they have no other option, but that’s not the case. Before we part ways, let’s take a look at some alternatives.

Unsecured Personal Loan

Unsecured personal loans have a high approval rate, and unlike title loans, do not require you to put down any property as collateral.

Most of the time, they have more forgiving interest rates, too!

Negotiate with Your Debtors

Open a clear line of communication with your debtors. You may be able to work together to make your current debt more manageable.

Credit Card

It’s generally advised that you stay away from credit card spending if you’re in debt, but some may actually have a more favorable interest rate than a title loan.

Borrow From Loved Ones

Money can complicate personal relationships, but as long as you don’t make a habit of borrowing money from your family and friends, it’s a much safer option, financially speaking.

Final Thoughts

That about covers all bases — if you take out a title loan, you’ll likely be offered between 25 and 50% of the value of the property you choose to put down as collateral.

They’re a great way to get money quickly, but this form of borrowing is not without its pitfalls, so always consider the alternatives before signing on the dotted line.

Brad Johnson