Car title loans: the cost and the risk
A title loan lets you borrow against a car you own, usually 25% to 50% of its value for 15 to 30 days. The typical charge is about 25% of the loan every month, and the lender can take the car if you do not repay.
Key points
- Title loans typically cost about 25% of the loan each month.
- You keep driving the car, but the lender holds the title and can repossess it.
- Many states ban or cap title loans.
- A credit union loan or a sale of the vehicle is usually less costly.
On this page
How a title loan works
You hand over the title to a car you own outright, or nearly so. The lender advances 25% to 50% of the car’s value, commonly $100 to $5,500, and you keep driving. In 15 or 30 days you owe the loan plus a monthly fee, which the Federal Trade Commission describes as averaging about 25%. Some lenders also require a GPS tracker or a spare set of keys.
What it costs
| You borrow | Fee at 25% a month | Due after 30 days |
|---|---|---|
| $500 | $125 | $625 |
| $1,000 | $250 | $1,250 |
| $2,500 | $625 | $3,125 |
If you cannot pay in full, many lenders roll the loan into a new one. Roll a $1,000 loan over three times and you have paid $1,000 in fees while still owing the original $1,000.
The risk to your car
When a title loan goes unpaid, the lender can repossess and sell the vehicle. Losing the car often means losing the way to get to work, which turns a short-term cash problem into a long-term one. In some states the lender may also keep any surplus from the sale or pursue you for a shortfall.
Where title loans are legal
State law varies sharply. Some states allow title loans with few limits, others cap rates at 36% or less, and others prohibit the product. Lenders in strict states sometimes offer larger “installment title loans” under different rules. Check your state and its regulator before you apply.
Protections for military families
Federal law caps most loans to active-duty service members and their dependents at a 36% Military Annual Percentage Rate, and title loans are covered. Lenders are not allowed to take a vehicle title as security from covered borrowers.
What to try before a title loan
- A credit union loan, including an auto-secured loan at a normal interest rate
- A payment plan with whoever you owe
- Selling the car and buying a cheaper one, if the loan is larger than you can repay
- A pawn loan on something less essential than your transportation
Our alternatives page and the ways to borrow money comparison cover these in detail.
Questions to ask before you sign
- What is the total I will repay, in dollars, if I pay on the due date?
- What does one renewal cost, and how many renewals are allowed?
- Is a GPS tracker or a starter-interrupt device installed on the car?
- How many days after a missed payment can the car be taken, and what notice will I receive?
- If the car is sold, do I receive the money left after the debt and fees?
State law answers some of these. Where it does not, get the lender’s answer in writing.
If you already have a title loan
Ask the lender for a payoff amount in writing and whether it offers a payment plan. If you believe the lender broke the rules, complain to your state regulator and to the CFPB. Our guide to what happens if you don’t pay explains the collection process.
Common questions
How much can I get for a title loan?
Usually 25% to 50% of the car’s value. Lenders appraise the vehicle and may cap the loan under state law.
Can I get a title loan if I still owe on the car?
Some lenders allow it when you have substantial equity. Most require a clear title in your name.
What happens if I can't repay a title loan?
The lender can repossess and sell the car. Depending on the state, you may also owe a remaining balance.
Do title lenders check credit?
Many do not pull a major-bureau report because the car secures the loan. They still verify the title, the vehicle’s value and often your income.
Does Northlight lend money?
No. Northlight is an information site. We explain costs and state rules; we do not make loans or credit decisions.
See the payment before you apply
Pick an amount and a term. The calculator shows the monthly payment, the total and the cost of credit at the highest APR we allow.
Sources
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