How to Keep Your Car With a Title Loan
Yes, you can keep and drive your car during a title loan. The lender holds your title, not your keys, and places a lien on the vehicle until you repay. What keeps the car in your driveway is simple: repay on schedule, or get out of the loan on your terms before a missed payment turns into a repossession. This guide explains how the arrangement works, where borrowers get into trouble, and what to check before you sign.
TL;DR
- With a title loan you hand over the title, not the car. You keep driving it while the lender holds a lien, as long as you stay current.
- You get the title back only after you repay the amount borrowed, the finance charge and any other fees.
- The risk is repossession. Federal research found roughly one in five single-payment title loan borrowers had a vehicle seized.
- Check the APR, the fees and the due date before you accept, and compare cheaper options first.
- Cash Title Express shows you written terms with no obligation to accept, so you can review an offer before you decide.
Table of Contents
- What “keeping your car” actually means
- How the lien works
- What you need to qualify
- How much you can borrow against your car
- What the loan really costs
- Where borrowers lose the car
- A checklist to protect your car before you sign
- If you are already struggling with a title loan
- Our perspective: borrow so the car stays yours
- See your terms before you decide
- FAQ
- Sources
What “keeping your car” actually means
A car title loan is a secured loan. Your vehicle is the collateral, but the lender does not take possession of it when the loan starts. According to the Federal Trade Commission, to get a title loan you give the lender your vehicle title, and you do not get it back until you repay the amount borrowed, plus the finance charge and any other fees.
That is the whole trade. You keep:
- the car itself, the keys and the daily commute
- your registration and insurance responsibilities
- the right to drive to work, school and appointments
The lender keeps:
- the paper title, or a recorded lien on it
- the legal right to repossess if you default under the contract and state law
We go deeper on the day-to-day side in our guide on whether you keep driving your car during a title loan. The short version: ownership is shared in practice until the lien is released, but use of the car stays with you.
How the lien works
The lien is the lender’s claim on your car. It sits on the title until the debt is paid. While it is there, you generally cannot sell the car or transfer the title without paying the lender, because a buyer cannot get a clean title. If you want to sell, you need to pay off the loan first or arrange the payoff as part of the sale.
Once you repay everything you owe, the lender releases the lien and you get your title back. Keep proof of the payoff and check that the lien release is recorded in your state. If the car is totaled or stolen while a loan is open, the lien still matters, and we cover that in what happens to a title loan after a total loss or theft.
Can you use a financed car?
Usually not. The FTC says you generally need to own the vehicle free and clear, although some lenders will take your title if you have paid off most of your vehicle loan. If you still owe a lot to a bank or dealer, that lender already holds the lien, so a title lender has nothing to place its own claim on.
What you need to qualify
Requirements vary by lender and state, but the core is the same. Los Angeles County’s consumer department notes that to qualify you give the lender your car’s title and may need to show you can repay the loan and have a regular address. In practice that means:
- A title in your name. It should be clear of other liens, in most cases.
- A vehicle the lender can value. The loan is based on the car’s worth.
- Proof of income. Lenders want to see that you can repay.
- ID and proof of address.
Credit score matters less than with a bank loan, which is why title loans attract borrowers with bad credit. That does not make them safe for everyone. Our page on car title loan requirements lists what to have ready, and our overview of how approval works with bad credit explains what lenders look at besides your score.
How much you can borrow against your car
According to the FTC, title loans usually run 25% to 50% of the vehicle’s value. A car worth $8,000 might therefore support a loan somewhere between $2,000 and $4,000 with a lender following that pattern. The CFPB found the typical auto title loan was about $700 in its 2016 research, so most real-world loans are much smaller than the car’s value.
Cash Title Express matches car owners with licensed lenders for loans from $500 to $50,000, depending on the vehicle, the state and the lender’s review. A bigger loan against a more valuable car means more at stake, so borrow the smallest amount that solves the problem.
What the loan really costs
Keeping the car is only a good deal if you can afford the loan. The CFPB reported in 2016 a typical APR of about 300% for a single-payment title loan and about 259% for an installment title loan. Those figures come from research on storefront lending and rates differ by lender and state, but they show why the cost deserves more attention than the speed.
The FTC tells borrowers to check, before signing:
- the finance charge
- the APR
- processing, document or origination fees
- late, returned-check and rollover fees in the agreement
FTC guidance also says title loans typically last 15 or 30 days. A single payment due in a month is hard to cover if you were short on cash to begin with. See our breakdown of title loan fees and hidden charges, the explanation of monthly rate versus APR and the page on rates, costs and state caps.
A worked example
Suppose you borrow $700 on a 30-day single-payment loan. If the lender charges the equivalent of a 300% APR, the finance charge for one month is roughly one twelfth of that annual rate, or about 25% of the amount borrowed. That is about $175 on top of the $700, so you would owe about $875 at the end of the month. This is an illustration of the arithmetic, not a quote from any lender. Your actual charge depends on your contract and state law, so read the line items in your written offer.
Where borrowers lose the car
The most useful thing to know about keeping your car is how people lose it. Three patterns show up in the federal data.
Repossession after default
The FTC states that if you cannot repay what you owe, the lender may repossess your vehicle and sell it. In some states, lenders can keep all the proceeds of the sale, even when that amount exceeds what you owe. The CFPB’s research indicates roughly one in five single-payment auto title loan borrowers have their vehicles seized by the lender after failing to repay. We unpack that number in what the repossession statistic means for borrowers.
Renewing again and again
The CFPB found that more than four in five single-payment auto title loans are renewed when due, and in more than half of cases borrowers take out four or more consecutive loans. Each renewal can bring a new finance charge. The loan grows more expensive while the original amount barely moves. If you are tempted to roll the loan over, read the title loan rollover trap first. When you fall behind, lenders may also add charges on overdue sums, and it helps to understand how late-payment interest is calculated before you agree to any schedule.
GPS trackers and starter interrupt devices
Some lenders use GPS and starter interrupt devices to locate a vehicle and disable its ignition remotely, according to the FTC. The FTC’s repossession guidance adds that, depending on your contract and state law, using a kill switch might be treated the same as a repossession or as a breach of the peace. If you have questions, it points you to your state attorney general. Ask any lender up front whether the car will carry such a device. Our article on GPS and starter interrupt devices in title loans lists what to look for in the contract.
A checklist to protect your car before you sign
Use this list on any offer, ours or anyone else’s.
- Get the terms in writing. The finance charge, APR, due dates and every fee should be on the page.
- Pick a payment you can make from your regular income. Count rent, food, insurance and fuel first. If the due date lands before your next paycheck, the plan has a hole.
- Ask about prepayment. You want no penalty for paying early, so extra cash can end the loan sooner.
- Ask about tracking devices and repossession rules. Find out what happens after a missed payment and whether there is a grace period.
- Confirm the lender is licensed in your state. Title loan rules differ by state, and some states do not allow the product at all. The CFPB counted storefronts in 25 states in 2016, so laws have to be checked for your own state. Our state and city directory shows local rules, including Texas and Phoenix, AZ.
- Know the exit plan. Decide before you borrow how you will repay and what you will do if something goes wrong.
- Do not borrow more than you need. A smaller balance is easier to clear.
Servicemembers have extra protection
The Military Lending Act limits the military annual percentage rate (MAPR) on many types of credit, including car title loans, to 36%, and the MAPR includes fees for add-on products, according to the CFPB. Under the regulations in place when the CFPB wrote its 2014 report, the protections applied to closed-end auto title loans of 181 days or fewer. If you are on active duty or a covered dependent, read our explainer on the Military Lending Act and title loans before you apply.
If you are already struggling with a title loan
Do not wait for the lender to move first. Contact it before the due date and ask what it can offer, such as a payment plan or a lower-cost refinance. Getting out may mean negotiating with your current lender or taking a new, more affordable loan to pay it off, as consumer finance writers commonly advise.
The FTC lists less expensive and less risky alternatives to a title loan:
- asking creditors for more time
- a credit union loan, including Payday Alternative Loans (PALs)
- a community bank loan
- using a tax refund
We compare more options in 7 alternatives to check before a title loan. If any of those is within reach, it will probably cost you less. If none is, a title loan with clear written terms and a payment you can afford is a defensible last resort, and it lets you keep the car you need for work.
Our perspective: borrow so the car stays yours
We work with car owners who have bad credit and need money now. Almost all of them ask us the same thing: “Will I still have my car?” Our honest answer is yes, if the loan is sized to your budget. The product is built around that idea: you apply online, you see written terms, you have no obligation to accept, and the lenders we match are licensed for your state requirements. We also look for terms with no pre-payment penalty, because the fastest way to protect your car is to finish the loan early.
The data above is why we push borrowers to read the numbers before the speed. Funding can happen the same day, but a fast approval is not a reason to skip the page showing the finance charge. If the payment does not fit your next paycheck, wait, shrink the amount or try a cheaper route first. A loan you can repay is the only kind that lets you keep your vehicle.
— Constantine
See your terms before you decide
If a title loan fits your situation, Cash Title Express lets you handle the whole process online. You request an offer, receive written terms from a licensed lender matched to your state, and decide with no obligation. Loan amounts range from $500 to $50,000, you keep driving your car, and there are no pre-payment penalties. Start with online car title loans, or check how the process works step by step.
If you need money quickly, see our page on same-day title loan funding for the timeline and the rules that apply.
FAQ
Do I get my car title if I have a title loan?
No. The lender holds your title, or a lien on it, until you repay the amount borrowed plus the finance charge and any other fees. Once you pay in full, the lien is released and the title comes back to you. Keep the payoff record for your files.
Can I still drive my car with a title loan?
Yes. You keep the car and use it every day while you repay, provided you stay current on the loan. The lender’s claim is the lien, and it can only act on it if you default under your contract and state law. Ask whether the car will have a GPS or starter interrupt device.
Can I use a financed car as collateral?
Usually you need to own the car free and clear. According to the FTC, some lenders will accept the title if you have paid off most of your vehicle loan. If you still owe much on the car, a title loan is generally not available.
What happens if I miss a payment?
The lender may repossess the vehicle and sell it, and in some states it can keep all of the sale proceeds even when they exceed the debt. Call the lender before the due date and ask about a payment plan, and contact your state attorney general if you think the lender is acting improperly. The sooner you speak up, the more choices you have.
Which states allow title loans?
Not every state does. The CFPB counted about 8,000 storefronts across 25 states permitting this lending in its 2016 report, and state laws have changed since then. Check your state’s rules through our title loans by state page and your state regulator.
Sources
- What To Know About Payday and Car Title Loans, Federal Trade Commission
- Vehicle Repossession, Federal Trade Commission
- Payday Loans, Auto Title Loans, and High-Cost Installment Loans, CFPB (2016)
- Car Title Loans, Los Angeles County Department of Consumer and Business Affairs
- SCRA and MLA protections handout, CFPB
- The extension of high-cost credit to servicemembers and their families, CFPB (2014)