How Car Title Loans Work

A title loan uses your car as collateral. The lender holds your vehicle's title until you repay; if you default, they repossess and sell the car. Typical APRs run 200%–300%.

How the loan is structured

The lender appraises your vehicle and lends 25%–50% of its market value, usually $100–$5,500. You hand over the title and continue driving the car. Most title loans are 30-day single-payment loans, though some states require longer installment terms.

The real cost

A $1,000 title loan at 25% monthly interest costs $250 in fees over 30 days — a 300% APR. According to the CFPB, about 20% of single-payment title loans end in vehicle repossession, and roughly half of borrowers roll the loan over four or more times.

What lenders look at

• Free-and-clear title in your name (no liens)
• Vehicle age and mileage — most lenders won't touch cars over 10–12 years old
• Proof of income — minimal compared to a bank loan
• No credit check in most cases

Safer alternatives to try first

1. Credit union PAL — capped at 28% APR, $200–$2,000, repaid over 1–12 months
2. Personal installment loan — see our installment-loan guide
3. Emergency loan — explore emergency loan options
4. Payment plan with the creditor you owe — utilities, medical providers, and landlords often negotiate

If you take a title loan anyway

• Borrow the smallest amount that covers the emergency
• Set a hard repayment date before signing — don't plan to roll over
• Confirm the lender is licensed under your state's loan laws
• Read the agreement for the exact repossession trigger and any grace period

Reviewed by Darnell Pierce, MBA. See our fact-checking policy.