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Car Title Loan Requirements

By Kimberly Rotter

Updated May 14, 2021

Reviewed by Thomas Brock

A car title loan is short-term loan in which the car of the borrower serves as collateral for the debt. The majority of the borrowers are consumers who are not eligible for other financing alternatives.

If you reside in a state that allows the use of car titles loans (see states that Allow Car Title Loans), here’s how to get one. The borrower must bring the car and necessary paperwork and other documents to the loaner. Although some title loan applications are available on the internet, lenders must to check that the car is in good condition – and the completeness of the paperwork – before releasing money. The lender keeps the title of the vehicle, places a lien on it, and then transfers the money to the borrower.

The loan limit is usually between 25% and 50percent of vehicle’s total value in cash ( The borrower repays the loan with charges and interest, within the time period that is allowed (usually 30-days) and then reclaims the title, lien-free.1

Important Takeaways

The car title loans are short-term secured loans that borrow against the car that the borrower is using as their collateral.

They are often associated with subprime lending, as they usually involve high-interest rates and borrowers who have poor credit ratings. And not all states permit them.

To qualify for a title loan you’ll need documentation that you are who you say you are, that you own your vehicle, that you’ve earned income, and at least two references.

Additional steps are sometimes needed to lower the risk for lenders by installing GPS trackers on the vehicle to help in the event of a repossession.

Documents You’ll Be Needing

To qualify for a car title loan which is also known as a pink slip loan generally, the borrower has to own the vehicle outright; there may be no liens attached to the title.1 Lenders also require certain documentation, including each of them:

Original title of the vehicle indicating sole ownership

Government-issued identification matching the name on the title.

Utility bill or any other proof of residency that matches the name on the title.

Current vehicle registration

Evidence of insurance for the vehicle

Pay stubs from recent pay or other proof of ability to repay the loan

Names or phone numbers, as well as addresses of at least two references that are valid.

Working copies of the keys to the car

Certain lenders will also require a GPS tracking device that is attached to the car, in case the borrower defaults and the lender gets the right to repossess the vehicle. Some of these devices allow the lender to deactivate the vehicle remotely.1

There is no requirement for excellent credit score to qualify for an auto title loan. In fact, many title loan lenders will not check your credit at all, since the loan is based solely on the resale value the vehicle. Additionally, you don’t require employment to be eligible for a Title loan.1

Fees and rates

Car title loans are significantly more costly than traditional bank loans. Rates of interest can vary, but in states where the rate is not set in a cap, it is generally determined at 25% per month, or 300% annually.2 This implies that a customer who borrows $1,000 will need to repay $1250 at the end of the 30 days to avoid going into default.

Most lenders charge a lien fee. In states where title lending is not controlled, some lenders charge origination fees, document fees, processing fees, key fees or other fees.1 The fees will add up quickly and can amount to more than 25 dollars (or more) in addition to the loan as well as interest charges.3 Be sure to add all fees when figuring the total cost to the loan.

(For more details on this topic for more details, check out: Car Title Loan Limits).

A good example of a Title Loan

Let’s say that Maria has recently lost her job and she has to work to pay the bills and pay her rent. In a last-minute solution she chooses to take out money using a car title loan against her car, which has a current market value of $2,500. The loan provider will extend her a car title loan for $1,250.

When applying, Maria needs to provide proof of title (that she is the owner of the vehicle) and additional documents. The interest rate was advertised as at 20% over the 30-day length of loan However, Maria made the mistake of believing it was already an annualized rate. The actual annualized percentage (APR) in fact was 240%! Much higher than Maria would have ever accepted as a fact.

By the end of the one-month term, Maria was required to repay $1,500, significantly higher than the approximately $1,270 she was hoping to pay. In the face of her dire financial situation, Maria was unable to find the additional $230 and was forced to forfeit the title to her car.

The Bottom Line

The best candidate for a car title loan is one who owns their vehicle in full and is aware of the potential expensive cost of the loan and has a reasonable expectation of having the money needed to pay back the loan prior to the time when the repayment period ends. If there’s no concrete and realistic strategy for paying off the loan, a car title loan could result in the sale of the vehicle for the equivalent of half or less than the value.

Many title-loan borrowers renew their loans multiple times, which makes the financing much more expensive overall. Therefore, the most critical consideration is ability to repay the loan by the due date.

(For more information, see Getting a Car Title Loan.)

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