What to Know About Title Loans

What Will You Need to Apply for a Title Loan?

Every time you apply for a loan, the lender will ask you to submit certain documentation during the application process. If you are planning on applying for a title loan, be prepared to provide:

• Your driver’s license or another type of government-issued ID
• The title to your vehicle
• Proof of income (examples include recent pay stubs, bank statements, or tax returns)
• Proof of residence (examples include your driver’s license, a recent utility bill, or a lease agreement)
• Proof of auto insurance

If you can’t find the title to your vehicle, it’s important to let your lender know right away. They can help you obtain another copy from your state’s Department of Motor Vehicles (DMV) so you can finish your application as soon as possible.

How Much Can You Borrow Through Title Loans?

You might be wondering how much you will be able to borrow if you are approved for a title loan. The answer to this question will depend on several factors, including:

• Your income: The title loan company will need to evaluate your income to determine how much you can afford to repay. This evaluation will impact how much you are approved to borrow.
• Your vehicle’s value: Your vehicle is used as collateral, so the lender must know how much it is worth before deciding how much you can borrow. Your lender will calculate your vehicle’s resale value based on its make, model, year, mileage, condition, and trim level. You cannot borrow more than your vehicle is worth.
• Your equity: You cannot borrow more than the value of your equity. To calculate your equity, subtract the amount you owe on your vehicle from your vehicle’s resale value.

In general, the title loan company may allow you to borrow anywhere from $2,000 to $50,000 per loan.

Do Title Loans Affect Your Credit Score?

Taking out any type of loan, including a title loan, will cause your credit score to take a slight dip. However, this is usually temporary.

In the long run, a title loan could improve your credit score. Your title loan company may report your payment information to the credit bureaus. Payment history has a major impact on your credit–in fact, it accounts for about 35% of your overall credit score.

If you consistently make on-time payments, your credit score will improve over the course of your loan. On the other hand, if you make late payments or miss payments altogether, this will hurt your credit score.

To protect your credit score, make sure you never miss or make a late payment. It’s also important to never borrow more than you can afford to repay.

What Are the Advantages of Title Loans?

There are a number of benefits to taking out a title loan, including:

• Fast processing times. Title loans are ideal for people who need cash in a hurry due to their fast processing times.
• Easier to qualify. It’s much easier to qualify for a title loan than it is to qualify for a traditional personal loan. In fact, you may qualify for a title loan even if you aren’t eligible for a traditional personal loan.
• You keep your vehicle. You won’t lose access to your vehicle just because you are using it as collateral for a title loan.
• No prepayment penalties. Unlike other loans, title loans are not designed with prepayment penalties. This means you won’t be penalized if you choose to pay your loan off earlier than expected.
• Minimal restrictions on spending. Your lender won’t tell you what you can and cannot do with the money you borrow through a title loan as long as funds are used legally.

These are some of the many reasons why people often choose title loans over other loans.

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