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March 5, 2023

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Documents You’ll Need

Rates and Fees

Example of a Title Loan

The Bottom Line

Personal Loans, Lending

Car Title Requirements for a Loan

By Kimberly Rotter

Updated May 14, 2021

Review by Thomas Brock

A car title loan is a short-term loan where the borrower’s car serves as collateral for the debt. Most of the time, consumers don’t qualify for other financing alternatives.

If you reside in a state that allows the use of car titles loans (see states that Allow Car Title Loans), here’s how to get one. The borrower brings the vehicle along with the necessary documents to the lender. While some title loan applications are available online, lenders will need to verify whether the automobile is in working order – and the completeness of the paperwork – prior to releasing the funds. The lender retains the title to the car and places a lien on it, and then transfers the funds to the borrower.

The loan amount is typically between 25% and half of vehicle’s cash value ( The borrower pays back the loan in full, including charges and interest within the time frame that is allowed (usually 30-days) and is able to claim the title lien-free.1

Important Takeaways

The car title loans are secured short-term loans that borrow against the car that the borrower is using as their collateral.

They are associated with subprime lendingbecause they usually involve high-interest rates and borrowers who have poor credit scores. Some states do not allow these types of loans.

To obtain an auto title loan you’ll need proof that you’re who you are and you own your car, that you’ve earned a living and that you have two references.

Additional steps are sometimes necessary to decrease the lender’s risk, such as installing GPS trackers on the vehicle to aid in a possible repossession.

Documents You’ll Need

In order to get a title car loan, also called a pink slip loan generally, the borrower has to own the vehicle in its entirety and there should be no liens attached to the title.1 Lenders also require certain documents, which include any or any of these:

Original title of the vehicle indicating sole ownership

Government-issued identification matching the name on the title.

Utility bill or other proof of residency that matches the name on the title.

Current registration for the vehicle

Proof of vehicle insurance

Pay stubs from recent pay or other evidence that shows the ability to repay the loan

Names, phone numbers and addresses that are at minimum two valid references

Copies of the keys to the car

Certain lenders will also require some lenders also require a GPS tracking device that is attached to the car in the event of default and the lender wins the right to seize the car. Certain devices are designed to permit the lender to disable the vehicle remotely.1

There is no requirement for good credit to get a title loan. In fact, most title loan lenders will not examine your credit in any way because the loan is contingent on the resale value of the vehicle. Likewise, you do not require employment to qualify for a title loan.1

Fees and Rates

Title car loans are considerably more expensive than conventional bank loans. Interest rates differ, however in states where the rate is not set in a cap the rate is usually determined at 25% per month, or 300 percent annually.2 This implies that a customer who has borrowed $1,000 will have to pay back $1,250 by the end of the thirty days to avoid default.

Most lenders charge a lien fee. In states where title lending isn’t controlled, some lenders charge origination charges, document fees processing fees, key fees, or other fees.1 The costs will add up quickly and could amount to more than 25 dollars (or more) in addition to charges for the loan or interest charges.3 Make sure you include all fees when figuring the total cost for the loan.

(For more details on this topic, see: Car Title Loan Limits).

Example of a Title Loan

Imagine that Maria has recently lost her job, and is struggling to pay the bills and make rent. For a temporary solution she chooses to take out money using the car title loan against her vehicle which has a current market value of $2,500. The loan provider will extend her car title loan at $1,250.

In the process of applying, Maria needs to provide evidence in the form of a title (that she is the owner of the vehicle) along with additional documents. The interest rate was advertised as 20% for the 30 day length of loan However, Maria made the mistake of assuming that the interest rate was already annualized. The actual annualized rate (APR) is actually 240%! This is much higher than Maria would have ever accepted as a fact.

After 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 of her car.

The Bottom Line

The ideal person to take advantage of a vehicle title loan is one who owns their vehicle in full and is aware of the potential costly loan and has a reasonable expectation of having the cash to repay the loan prior to when the repayment time ends. If there is no specific and feasible plan to pay off the loan the car title loan could mean selling the vehicle at only a fraction of its value.

Many borrowers with title loans renew their loans repeatedly, making the loan more costly overall. Therefore, the most critical consideration is ability to repay the loan by the due date.

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

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