How Title Loan Companies Determine Eligibility for Title Loans

By marcela • January 20, 2022

If you’re short on cash, there are a number of things you can do to get the money you need. Some people pick up extra shifts or work a side gig to make more money. Others borrow money from their friends and family when they’re in a pinch. But what should you do if these options aren’t enough? Or if they aren’t even available to you? In this case, a title loan might be the solution.

A title loan is a secured loan that allows you to borrow money by using the title to your vehicle as collateral . Title loans are typically processed quickly, which is why people often rely on them when they need cash as soon as possible.

If you’re considering this option, you may be wondering if you will qualify for a title loan. Title loan requirements are very different from other personal loan eligibility requirements. Because of this, you may qualify for a title loan even if you don’t qualify for a traditional personal loan .

So, what is required to get a title loan? Here’s what you should know:

The Title to Your Vehicle

The title to your vehicle is used as collateral to support your title loan, so you must be able to provide this important document to your lender during the application process. However, if you can’t find the title to your vehicle, you can still apply for a title loan. Just let your lender know that you have misplaced your title. They can help you obtain a new title so you can complete the application process.

Some title loan companies only accept titles to cars, trucks, and SUVs, whereas others also accept titles to motorcycles and RVs. Talk to your lender to find out what types of titles you are allowed to use as collateral.

It’s important to note that a salvage title cannot be used as collateral to support a title loan . If a vehicle has a salvage title, this indicates that the vehicle has suffered extensive damage and been declared a total loss by an insurance company. Because the vehicle has been badly damaged in the past, it’s difficult to estimate its current value, which is why this type of title is not accepted as collateral.

Credit Check

You must consent to a credit check if you want to borrow money with a title loan . Title loan companies perform credit checks to evaluate the creditworthiness of applicants. In other words, they look at an applicant’s credit history to determine what kind of borrower they might be if they are approved for a title loan.

A title loan company will consider your credit when determining if you qualify for a loan, but this isn’t the only factor that will impact your eligibility. Other factors, including the value of your vehicle and your ability to repay the loan, will also impact your eligibility. Because of this, you don’t need perfect credit to get approved for a title loan. In fact, most credit types are accepted by title loan companies.

Your credit can impact your interest rate and other terms of your loan, too. In general, borrowers with high credit scores can typically secure lower interest rates.

Vehicle Ownership

You cannot use a title as collateral for a title loan unless you are the legal owner of the vehicle. This means your name must be on the title of the vehicle .

If you are the sole owner of the vehicle, your name should be the only one on the title. But if you share ownership, other names may also be listed on the title. You don’t need to be the sole owner of the vehicle to qualify for a title loan . You may qualify for a title loan even if other names are included on the title. All that matters is that your name is also there, which signifies that you are a legal owner of the vehicle.

You don’t need to own your vehicle free and clear to qualify for a title loan . Everyone’s situation is unique, but in general, many people who are still making payments on their vehicle are approved for title loans.

Vehicle Value

Because your vehicle is used as collateral to support your title loan, your lender will want to know how much it is worth when determining your eligibility. This way, your lender will know how much they will be able to sell your vehicle for in the event you stop making payments on your loan.

During the application process, your lender will need to inspect your vehicle to calculate its value. Some lenders require in-person inspections whereas others accept photos of your vehicle in lieu of an in-person inspection.

Your lender will consider many factors when calculating the resale value of your vehicle, including its make, model, year, condition, mileage, and trim level .

Your vehicle must meet a minimum value requirement established by the lender to qualify for a title loan. The minimum value requirement varies depending on the lender, so it’s best to ask your title loan company directly for more information on their policies.

Equity in Your Vehicle

You must have equity in your vehicle to qualify for a title loan. The term “equity” refers to the value of an asset after deducting liabilities. To put this in simpler terms, your equity is the difference between your vehicle’s resale value and the amount you still owe on it .

For instance, say your vehicle’s resale value is $15,000 and you owe $3,000 on it. This means you have $12,000 in equity in your vehicle ($15,000-$3,000=$12,000.) You cannot borrow more than the value of your equity. Typically, you are allowed to borrow up to a certain percentage of your equity in your vehicle.

You will not qualify for a title loan if you don’t have equity in your vehicle. For example, say your vehicle’s resale value is $8,000 and you still owe $9,000 on it. You owe more than the vehicle is worth, which means you don’t have equity and cannot use this vehicle as collateral for a title loan.

Your Ability to Repay the Loan

Your title loan company will not want to let you borrow money that you cannot afford to repay. For this reason, the lender will need to assess your ability to repay the title loan when determining whether you qualify.

A lender will ask you to submit proof of income such as recent bank statements, pay stubs, or tax returns. These documents serve as proof that you have a reliable source of income that you can use to repay your loan. Your income doesn’t necessarily need to come from a job. You may qualify for a title loan with other sources of income such as veterans’ benefits, disability benefits, retirement benefits, spousal support, or rental income.

Your lender will analyze the documents you provide to determine how much you can afford to repay. The results of this analysis will impact if you are approved and if so, the amount of your title loan.

Find out if you qualify for a title loan–and if so, how much you can borrow –by contacting 1(800)Car-Title® today. Call 1-800-227-8485 or fill out the form on our website to get a free title loan quote today.

marcela • January 20, 2022

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