by Ben Sweiry ·
Modified on 13 October, 2023
Title Loan fees typically include an average monthly finance fee of 25 percent.
Title loans are short-term loans that allow you to borrow money using your vehicle as collateral.
A car title loan typically allows you to borrow anywhere from 25 percent to 50 percent of the value of your vehicle. These short-term loans typically start at $100 with repayment periods of 15 to 30 days.
Title loans are a good alternative to payday loans as they can come with more favorable terms and looser credit checks, as the lender hold the title of your vehicle as collateral.
How Much Do Title Loans Cost?
Loan example: Borrow $1,000, pay $250 in interest, total repayable $1,250 at 25% interest rate, 300% representativeAPR.
Title Loan fees typically include an average monthly finance fee of 25 percent, which translates to an APR of 300 percent. On a $1,000 loan, you’ll pay an additional $250 in interest even if the loan is repaid in just 30 days. If you’re late with your payment and late payment penalties are assessed, the loan could cost you a small fortune.
Some lenders also charge origination, processing and document fees, driving the borrowing costs up higher. You may also be required to obtain and pay for a roadside service plan for your vehicle.
To get the title to your vehicle back, the loan must be paid in full, including the fees your lender charges for providing the money.
How Does a Title Loan Work?
A car title loan offers a fast and effective way to borrow money secured against your car, bike or truck. This makes them attractive for people who own a car and need to borrow money with a bad credit score – and because they might have been turned down for traditional products such as personal loans or payday loans.
You can be eligible whether you own the vehicle outright, on lease or partially on finance.
When applying for a car title loan, you temporarily hand over the ‘title’ to the lender who owns the vehicle for the duration of the loan. So you can borrow 25% to 50% of the car’s value (sometimes upon inspection of the vehicle) and repay over 30 days.
However, if you cannot keep up with repayments and the lender has tried to collect on several occasions without success, your car could be repossessed by the lender.
Title Loans vs Payday Loans: what is the difference?
| Loan Type | Secured or Unsecured | Loan term | Bad credit considered | Valuable Asset Needed |
| Title Loan | Secured | Short term | Yes | Yes, vehicle |
| Payday Loan | Unsecured | Short term | Yes | No asset needed |
Title loans and payday loans are suited to different types of borrowers.
For example, a title loan could work well for someone who has a car to use as security and wants to borrow a larger amount than a payday loan would necessarily allow (borrowers able to get loans of $10,000 or more depending on the value of their vehicle).
However, for those who want quick and easy access to a short-term loan without having to put a valuable asset at risk of repossession, a payday loan may be more suitable.
The best way to borrow will depend on your circumstances and individual needs. When looking to find the best loan for you, it’s good to explore a variety of different options, helping you make a more informed decision on how and where to borrow.
Where Can I Get a Title Loan?
Title loans are legal in Alabama, Arizona, Delaware, Georgia, Idaho, Illinois ( see loans in Chicago), Texas, (see loans in Texas) Mississippi, Missouri, Nevada, New Mexico, South Dakota, Tennessee, Utan, Virginia, and Wisconsin.
They are, however, illegal in other states including Michigan, New York, Alaska and Oregon.
There are some US states that allow title loans to be sold at triple-digit APRs including: Alabama, Arizona, Delaware, Georgia, Idaho, Illinois, Mississippi, Missouri, Nevada, New Hampshire, New Mexico, Tennessee, Virginia, and Wisconsin.
Of these states, Delaware, Idaho, Illinois, Missouri, Nevada, New Mexico and Wisconsin set no cap on the cost of a car title loan.