The Pros and Cons of Title Loans

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Did you know that only 72% of US renters paid their September rent? If you’re in the 28%, you might be wondering how to pay your rent, and you might be considering title loans.

While a title loan can be useful, it’s a very risky way to borrow money. So before you get one, consider if it’s the right option for you and your situation.

Keep reading to learn about the pros and cons that come with a title loan.

Easier to Get

One of the most significant advantages of title loans is that they can be easier to get than traditional loans. You don’t have to have a perfect credit score for a lender to approve your application.

Even if you have a good credit score, you don’t usually have to worry about the lender checking your score. Some lenders will lend money to anyone, and that can reduce the number of hard checks on your credit report.

If you do have a lower credit score, you can get the financial help you need. Most traditional lenders will either reject your application or offer really bad terms for the loan, so a title loan might be a good alternative.

Quick Money

Not only is getting a title loan easy, but you can get the money quickly. With a traditional loan, you will have to wait for the lender to process your application and review your credit report.

Then, it could take another day or two before the bank transfer the money to you. However, you might be able to get money from a title loan the day you apply.

So if you’re running late on paying rent or utilities, you might want to get a title loan. Then, you won’t have to spend more on a late fee or risk not having your utilities.


Title loans can also be much more convenient than visiting a bank or credit union. You can find title loan locations that may be a lot closer to you than a traditional financial institution.

And lenders of title loans may have more flexible hours than a bank. While banks are usually only open during business hours and maybe Saturday mornings, some title loan places are open seven days a week.

That can be nice if you can’t afford to take off work to go apply for and get a loan. Instead, you can head to the title loan place before or after work and get the cash you need. Click for more on what to look for when choosing a convenient title loan place.

Access Your Car

Next, you should know that you can still use your car when you get a title loan. You will use your car as collateral for the loan, but you don’t have to leave it with the lender.

That’s nice if you only have one vehicle to use. As long as you make your loan payments on time, you will get to keep using your car while you have the loan.

If you’re good at financial management and can pay your bills, this is a good option. However, it does come with some risks, and those risks might outweigh the benefits.

Lose Your Car

While you can use your car, you might lose your car if you don’t pay off your title loan. You use the car as collateral so that the lender can collect on their money if you don’t hold up your end of the agreement.

That means the lender can repossess your car, and it can be hard to get the car back. If you can’t manage your money and keep track of payments, you may not want to risk losing your vehicle.

Even the best title loans can get out of hand, especially if you have to keep borrowing money. So make sure you can pay the loan back before taking the cash.

High Interest

Compared to traditional loans, title loans tend to have very high interest rates. If you have bad credit, you might not get a much better interest rate through a traditional lender.

However, if your credit is average or good, you can save a lot of money on interest with a traditional lender. You might need to wait for the loan, but you can save money if it will take time to pay the loan back.

The average annual percentage rate (APR) on title loans is about 391%. That means you will pay almost four times the loan amount in interest per year, and that’s much higher than the APR on traditional loans.

Other Fees

You might also incur other interest and fees if you aren’t careful. Some lenders will let title loans rollover if you can’t pay them back on time, but you’ll have to pay the same loan fee for each rollover.

If you roll the loan over once, your fees will then double. But you might also need to pay fees for repossession, or you might have to pay for credit insurance.

Be sure to consider all of the fees your lender is charging. That way, you can make sure you will be able to pay back everything, and you can keep from borrowing more than what you absolutely need.

Low Limits

Another disadvantage of title loans is that you can’t borrow as much as when you get a traditional loan. You might only be able to borrow a few hundred dollars, which can help.

But if you need more money to cover rent or other expenses, that might not be enough. If you need more money, you will either need to take out another title loan or go to a bank.

Sure, a second title loan may be convenient and easy, but it will only add to your total cost over time. Make sure you can get the amount of money you need without having to pay too much in interest and fees.

Are Title Loans for You?

Before you determine how to borrow money, consider the good and bad of title loans. While they do have a few pros, they also have plenty of cons that could make them not worth the risk.

You should consider both sides of title loans to determine if they’re right for you. Then, you can get the financial help you need without digging an even bigger financial hole for yourself.

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