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What is a Car Title Loan?

Word cloud with Car Title Loa
Being cash-strapped? Have a bad credit? Think a Car Title Loan is the solution?

A car title loan, also known as a pink slip loan or simply title loan, is a secured loan where you can use your vehicle title as collateral.

Because the car title is used to secure the loan, no consideration is given to your credit history or credit score. If you are cash-strapped, you can get a loan in 10 minutes or less. The amount can be as low as $100, even if some lenders have a higher minimum.

The typical title loan is structured as one-month loan. After one month, you must either repay or renew the loan; otherwise the lender will take possession of your car. This will happen even if only a fraction of the value of the car was used to secure the loan.

Since most lenders require a duplicate set of car keys, the repossession is easy.

The lender will look up the auction value of your car and generally offer a loan that is below 50% of what your car is worth. That means the lender will make money even if they need to repossess your car.

You should be aware that Car Title Loans are extremely expensive. The rate is typically 25 percent per month, which translates to 300 percent annual interest. That means that you in one year have paid three times as much as you initially borrowed. In addition, most lenders will also charge additional fees.

Make sure you know what you are required to pay. Some title loan websites do not disclose this high annual percentage rate until you have submitted your application, so inquire before you apply.

You should also know that some Internet title loans may deprive you of your home state law protections.

If your finances are vulnerable you should think twice.

It is easy to get trapped in a cycle of high cost debt. Since the car may be the most valuable asset you own, and may be necessary for you to hold a job, make sure that you don’t have any other options before going down this risky and expensive path.

Today, only about 20 states allow title loans in one form or another, and states continue to push for stricter regulation.

About Mark
Problem solver. Entrepreneur. Music nerd. Traveler. Twitter: @markheart0 Facebook: Mark Heart


  1. Sundeep, you need to check all of the fine print on any type of loan from anywhere. Bigger companies do run loan promotions though, that might be a great way to take advantage of some free interest.

  2. party on, bro. grab the money on wednesday, pay back on fri.

  3. I read about payday loans from ACE. The ask for an employment and a bank account. Since the loan comes with a guarantee, I can change my mind and return the loan within 48 hours, paying nothing… Anyone know if this is real or just a gimmick?

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