Does My Car Need to Be Paid Off to Qualify for a Car Title Loan?

It’s a tricky question to ask: “Can you get a title loan on a financed car?” Because the fact of the matter is, the answer isn’t as straightforward as some may like it to be.

The short answer is that it usually depends on how much money you still owe on your vehicle at the time. If there are only a few payments left before the car is paid off, there are usually more options available to secure a car title loan on a financed car from a lender.

If the loan applicant still owes quite a bit on the car, it becomes trickier to be able to qualify for title loans on financed cars, but the answer is still not a definitive “no.”

Here, we will go over some of the major factors that may influence whether or not you can qualify for a car title loan while still making payments on your vehicle.

How Am I Able to Qualify for a Title Loan If I Still Have a Car Loan?

A car title loan is based off the value of your vehicle rather than the remaining payments yet to be made.

To get a title loan as a borrower, you will first need to consider the value of your vehicle. A higher valued vehicle will help you get the maximum amount covered in a title loan.

Equity is not determined by payments. The amount you have paid, and the amount left to be paid, have nothing to do with the equity of the car; they are separate.

Instead, equity is determined by the vehicle. This means things like:

  • Make
  • Model
  • Year
  • The condition of the vehicle with all the above factors considered

Outstanding car payments can be covered by the car title loan. You can increase the amount of your car title loan in order to cover these outstanding payments. When it’s paid off, you can fully use the car as collateral. The equity directly influences the title loan, so with a better vehicle, you can get more money. Even with ongoing payments, taking care of your vehicle can help you qualify.

Sometimes you still may have trouble getting approved for title loans for cars not paid off. Not all title companies are comfortable lending to someone who still owes on another vehicle. In this case, you may have to pay off the car before getting the title in your name.

Financing for a Car Title Loan

Traditional financing will factor in the outstanding car payments into the title loan, increasing the value loaned. Sometimes what will happen is a doubling of the outstanding amount.

That is to say that if $5,000 is still owed on the vehicle, you will need to qualify for at least $10,000. If you fail to qualify, you will still need to withdraw the maximum amount you are qualified for.

Paying Off Your Title Loan

how to get a title loan with a financed car

If you already have a title loan, the simplest way to get out of it is by paying it off. Sometimes that isn’t possible, however, and you’ll need to get creative to get out of it and get the car in your name.

Here are some options if you are struggling to make your monthly payments or just want to discover more affordable solutions:

  • You could swap out the car. Trading in your vehicle and downgrading to something more affordable can save you money in interest and fees while freeing up more cash each month that could go towards a payment.
  • You could refinance. Refinancing your loan (trading it out for another) can be helpful if you can switch to a fixed-rate loan from a credit union, bank, online lender, or peer-to-peer lender. This doesn’t fix the main problem of being short on money to pay a monthly bill, but it can lessen the severity of the issue.
  • You could negotiate with your current lender. A current lender might be willing to negotiate with you on rates if that means they won’t lose you as a customer. They may be willing to accept less money than you owe. However, be warned that this option will damage your credit.
  • You could default. Defaulting, also known as just not paying the bill, is not the best option, but it’s still available. This will ruin your credit, cause the lender to repossess your vehicle, and keep you in the debt you still owe. Even still, you will be out of the monthly payments and will no longer be paying for the car.
  • Avoid these loans in the first place. Preventing the need for car title loans is an obvious way to get out of these payments. If you’ve had trouble making payments before, make sure to save up and get yourself on the financially solid ground before getting your next car to avoid the situation entirely.

How to Get a Title after Paying Off a Car Loan

If you’re unable to qualify for a car title loan, you can still get your title after paying off your car. This process varies depending on the state, but usually, it requires a contact to your state’s Department of Motor Vehicles to notify them that your vehicle has successfully been paid off in full.

The lienholder (the lender) is usually the one to notify the DMV after the final check clears, and they prepare the proper paperwork. It’s important to double check the requirements for your state, however, and ensure you’re following the proper protocols listed on your state’s motor vehicles website.

Making the Loans Work

If you’re asking yourself, “Can I get a title loan while still making payments?” the answer is yes.

If you’re asking, “Will I get a title loan will still making payments?” the answer is maybe.

It depends on the lender you’re in negotiations with and what they require before they approve you. If you’re approved, you must pay off the loan before transferring the title in your name. You can do this by paying off the loans, refinancing, or using a high-equity vehicle as collateral to get out of your payment plan faster.

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