Try as you might to save for the future, you might often feel like you’re always one step behind all those unexpected expenses that keep cropping up.

Without the cash on hand to take care of life’s unexpected surprises, you might need to turn elsewhere for the money. So, should you get an auto title loan?

These loans help people to use a car they already own as collateral to get the necessary funds and to get their life back on track. Here are some of the pros and cons of title loans that you should consider before taking one out.

Learn the Pros and Cons of Title Loans


  • Anyone Can Qualify: All it takes to qualify for an auto title loan is to own your car. You can see how they work here. Most auto title loan companies don’t even run a credit check. This allows you to get the cash that you need in a tricky situation by using your car as collateral, even if your other borrowing options are dismal.
  • It Gives You Cash Quickly: No need to waste time waiting several days or even weeks to be approved – with a car title loan, you can get the cash that you need very quickly. In most cases, the money will be deposited in your bank account in around 24 hours. This is all because the application and approval process for auto title loans is very simple and fast, leaving nothing to delay you getting that cash in hand.
  • You Keep Your Car: Even though you’re using a car title as collateral, you can still drive away in it after you’ve gotten your cash. That’s right – even though you have handed over your title while you are paying back the amount that you have borrowed on your loan, you will get to keep driving your car.


  • Limited Loan Amount: The amount of money that you can apply for through an auto title loan is based on the value of your vehicle. While you might be eligible for an auto title loan, if you drive an older or run-down model, then you might not be able to get as much cash as you were hoping for. While this varies from lender to lender, it’s common to cap the loan amount at 50% of your car’s value.
  • You Might Need to Up Your Insurance Game: While you get to keep driving your car even though the title is in your lender’s hands, you might still be asked to buy extra insurance on the vehicle if the current policy you hold doesn’t comply with the lender’s standards. As you don’t technically own the car anymore until your loan is paid off, it is natural for your lender to want to make sure the car is adequately covered. However, depending on how much more money this will cost you out of pocket every month, you might be better off using that money elsewhere instead of getting the loan in the first place.
  • Extremely High Fees and Interest Rates: These types of loans tend to come with high fees and interest rates as the trade-off for being a quick, short-term loan. Depending on where you are living and the lender that you choose, you might end up paying as much in interest and fees as you would by taking out a payday loan! However, if you do your research and shop around a little bit, you’ll be able to find the best interest rate in your area. Before you sign away your auto title, make sure that you’ve done your research on the lender and that you understand all the loan terms. Keep in mind that there are several federal laws in place that mandate that these companies must fully disclose any and all rates, fees, and issues, so you don’t run into any unpleasant surprises down the road.
  • You Might Lose Your Car: If you don’t get the money you need to pay back the loan and end up defaulting on it, the lender has the right to repossess your vehicle. Because your auto title loan won’t be worth the full value of your car, the lender will be able to get much more value from selling your vehicle than they would have you paid the loan back in full. In short, you will be losing a lot more money than you borrowed if this happens. It’s easy to brush this risk aside, thinking that you’ll stay current on your loan.
    Nevertheless, unexpected things come up in life – which is likely how you ended up considering an auto title loan in the first place. It’s important to keep this possibility in mind and don’t ignore the consequences that could come with an auto title loan if you don’t pay it back in the allotted repayment period.
  • Repossession Might Only Be the Beginning: You might be thinking that the worst you could lose here is your vehicle. However, if you default on your loan and the lender doesn’t manage to get enough from your car sale to pay off the balance, you’ll still be liable for the difference. This doesn’t happen very often because the loan value tends to be lower than the value of the car, but it can happen if an estimate wasn’t done correctly.

The Verdict

As you can see, there are a lot of things to consider when it comes to deciding whether or not an auto title loan is right for you. Are title loans bad? Absolutely not! Title loans are a great way to get money on the short term when you really need it, and the benefits of title loans are excellent! However, it’s important to make sure that you have a plan to pay them back during the allotted time period to avoid some pretty steep consequences!

Avoiding those consequences, however, isn’t only about making sure you can pay the loan back (although that is a big part of it). It also has to do with choosing a good lender. To find the best title loan lenders around, see our top list of companies!

Published by Chad Williams

Chad Williams is a personal finance writer who oversees content published on Chad works closely with experts and industry leaders in every sector of finance to develop authoritative guides, reviews and advice articles with regards to audience interest.

Privacy Policy | Disclaimer | Contact Us | About