by Aidan Kang, CFA
Senior Writer
UPDATED: August 25, 2022

A car title loan, also known as an auto equity loan, is a short-term loan where the borrower uses their car as collateral. Just like payday loans, these loans often last for 15 to 30 days, and you can get between $100 and $5,500 to deal with any unexpected emergencies you may have.

Car title loans are usually preferred over traditional loans due to the easy application process and quick approval. However, here are a few things you should know before you go and get a car title loan.

1. The amount of loan you get depends on your car’s value

Lenders will evaluate your car and get to decide its value. Often, you will get between 25% to 50% of your car value in the loan. Some lenders may reduce the car value if the vehicle isn’t fully paid or if any outstanding loans are taken against your car. You can use a title loan calculator to help you calculate the estimated value of your car title.

2. You must own a car to qualify

A car title loan is a secured loan that uses your car as the primary collateral, meaning you must own a vehicle to qualify for the loan. If you get approved for a car title loan, you will hand your vehicle title to the lender in exchange for the loan. In addition, your lender will generally want to see your vehicle, a photo government ID, and proof of insurance. You will get your title back once you repay the loan. 

3. No credit checks

Since you put up your vehicle as the main collateral, the lender won’t need to explore your credit history to determine whether it’s risky to lend you money. That means you can rely on car title loans and other secured loans to get money, even with bad credit scores.

4. Car title loans have high-interest rates and fees

Car title loans often have an average annual percentage rate of 300%. That is much higher than most forms of credit, including credit cards. While this kind of loan typically lasts only for a month, the high-interest rate would mean that most people might not afford to pay back what they owe within a month.

Before applying for a title loan, ask the lender about the APR and total cost of the loan. You can then compare this information across different lenders to help you find the best possible offer for you.

5. You might lose your car

Since you put up your car as collateral, the lender will be able to repossess your vehicle should you fail to pay off the loan in full. In addition, you might end up paying even more in fees to get the car back, together with the past due amount. 


A car title loan is among the easiest and fastest ways to get instant cash. You can have a car title loan approved within a day or even hours for some lenders. However, before you apply for a car title loan, ensure you have the capacity to pay it back within the given time. Otherwise, you will risk losing your vehicle or getting buried in debt due to high-interest rates and fees.