Documents You'll require
Fees and rates
Example of a Title Loan
The Bottom Line

Loans Personal Loans

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

The car title loan is a short-term loan where the borrower's car can be used to secure collateral for the loan. Most of the time, consumers do not qualify for other financing alternatives.

If you live in a state that permits car title loans (see States that Allow Car Title Loans), here's how to get one. The borrower brings the vehicle and necessary paperwork with them to the lending institution. Although certain title loan applications can be found on the internet, lenders must to check the condition of the vehicle and also the completeness of the paperwork - before they release the money. The lender retains the title of the vehicle, places a lien on it, and transfers the loan to the borrower.

The loan amount is typically 25 to 50% of the vehicle's cash value ( The borrower repays the loan, plus the interest and fees in the time that is allowed (usually 30 days) and is able to claim the title, lien-free.1
Key Takeaways

The car title loans can be short-term, secured loans that borrow against the borrower's car as collateral.
They are often associated with subprime loans, since they usually involve high-interest rates and borrowers with poor credit scores. And not all states permit them.
To get the title loan you'll need to provide proof that you're who you claim to be and own your car, that you have earned income and that you have two references.
Other steps may be needed to lower the risk of the lender by installing GPS trackers on the vehicle to assist in potential repossession.

Documents You'll Need

To qualify for a title car loan which is also known as pink slip loan, in most cases a borrower must own the vehicle in its entirety; there may be no liens attached to the title.1 Lenders also require certain documents, which include any or each of them:

Original title to vehicle showing sole ownership
The government-issued identification matches the name on the title
Utility bill or other evidence of residence that matches the name on the title.
Current vehicle registration
Documentation of the insurance company's coverage for vehicles
Recent pay stubs or other evidence that shows the capacity to pay back the loan
Names address, phone numbers and names of at least two reliable references.
Work copies of the vehicle's keys

Certain lenders will also require a GPS tracking device that is attached to the vehicle, in case the borrower defaults and the lender gets the right to take possession of the car. Certain devices are made to allow the lender to disable the car remotely.1

There is no requirement for an excellent credit score to be eligible for a title loan. In fact, many title loan lenders will not look at your credit score at all, since the loan is contingent on the resale worth of the vehicle. Also, you don't require employment to be eligible for a Title loan.1
Fees and rates

Car title loans are considerably more expensive than conventional bank loans. Rates of interest can differ, however for states that have an rate is not capped the rate is usually determined at 25% per month or 300 percent annually.2 This means that a consumer who takes out a loan of $1,000 must to pay back $1,250 by the end of 30 days in order to avoid default.

Most lenders charge a lien fee. In states where title lending isn't regulated, some lenders also charge origination charges, document fees processing fees, key fees, or other fees.1 The costs are often high and could amount to more than $25 (or more) on top of charges for the loan or interest charges.3 Be sure to add all charges when you calculate the total amount to the loan.

(For more on this topic for more details, check out: Car Title Loan Limits).
An example of a title loan

Say that Maria was recently laid off from her job and she is struggling to make ends meet to pay rent. In a last-minute solution she chooses to take out money through the title of her car loan against her car, which currently has a market value of $2,500. The loan provider agrees to extend her a car title loan for $1,250.

When applying, Maria needs to provide evidence of title (that she is the owner of the vehicle) as well as additional documentation. The advertised interest rate was stated as being 20percent for the 30-day period of loan however, Maria did the wrong thing by thinking it was already an annualized rate. The real annualized interest percentage (APR) was actually 240%! Much higher than Maria would have accepted knowingly.

At the end of the one month period, Maria was required to pay $1,500 which was significantly more than the roughly $1,270 she was hoping to pay. In the face of her dire financial situation, Maria was unable to come up with the additional $230 and was forced to forfeit the title to her car.
The Bottom Line

The best candidate for a car title loan is someone who owns their own vehicle and is aware of the potential high cost of the loan and has a reasonable belief that they will have access to the cash to repay the loan prior to the time when the repayment period ends. If there is no specific and feasible plan for repaying the loan, a car title loan could result in the sale of the vehicle for half or less of its value.

Many borrowers with title loans renew their loans multiple times, which makes the financing much more expensive overall. Also, the most critical consideration is the capability to repay the loan on or before its due date.

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