Car title loans offer quick cash — often between $100 and $10,000 — in exchange for your vehicle’s title as collateral. Like payday loans, they’re often advertised as a quick solution in a one-time emergency. But the triple-digit interest rates, hefty fees and short repayment terms frequently lead to repeat borrowing, leaving borrowers stuck in long-term debt.
The Consumer Financial Protection Bureau found that 83% of customers who borrow against their vehicle’s title still owe money six months later.
Given the risk, it’s important to fully understand how car title loans work — and to weigh them against alternatives that are safer and less costly.
What is a car title loan?
A car title loan is a short-term, high-interest loan that’s secured by a vehicle you own. The amount of the loan is determined by how much your car is worth. Many lenders offer loans of 25% to 50% of the car’s assessed value. For instance, if a lender determines your car is worth $5,000, your maximum loan amount would be around $2,500.
The lender holds onto your title until you repay the loan. If you miss payments, the lender can repossess your vehicle and sell it.
Most car title loans are single-payment loans, which require a lump-sum payment, usually within 15 to 30 days. However, some lenders offer installment title loans where borrowers make multiple payments, often over three to six months.
How title loans work
Suppose you need to borrow money fast, so you take your car to a title lender. The lender assesses your car’s value and determines your loan amount based on how much it’s worth.
Let’s say the lender says your vehicle is worth $4,000 and lets you borrow $1,000.
You drive away with the cash in less than an hour. But the loan has a term of just 30 days and carries a 25% monthly financing fee. That means you’ll need to repay $1,250 — not $1,000 — when the loan comes due in a month, plus any additional fees the lender charges.
» MORE: Best emergency loans
When the due date comes around, you can’t afford to pay the balance in full. To avoid having your car repossessed, you roll over the loan for an additional $250. That means you’ll need to pay $1,500 for the lender to release your title.
Every time you roll over the loan, you’ll accrue additional interest and fees.
The CFPB found that roughly two thirds of title loan borrowers rolled over their loans at least seven times. For a $1,000 loan, that amounts to $1,750 in interest and fees alone — almost double the original loan amount.
Why title loans are risky
Title loans are risky due to the high APRs and short terms that frequently cause repeat borrowing and the risk of having your car repossessed.
High APRs and fees. Car title loans have an average annual percentage rate of 300% — only slightly lower than the typical payday loan. Often, lenders advertise the APR as a monthly finance charge, which can mask the true cost of borrowing over extremely short terms.
Consumer advocates generally consider 36% the maximum APR a loan can charge to be considered affordable.
Many lenders also tack on title and administrative fees, or they require you to purchase add-ons, like a roadside service plan.
Likelihood of repeat borrowing: Only about 1% of households reported using title loans in a 2023 FDIC survey . However, those who borrow against their car titles tend to do so repeatedly because exorbitant interest rates combined with short terms make it difficult for borrowers to repay their loans in full by the due date.
The average borrower rolls over their title loan eight times, according to the Center for Responsible Lending .
Repeated title loans can leave you stuck in long-term debt, with a typical borrower paying significantly more in interest and fees than the original loan amount.
Risk of losing your vehicle: If you don’t repay your loan principal, interest charges and fees, the lender can repossess your car — which is the end result of at least one in five title loans . In some cases, your lender can sell your vehicle for more than you owe and pocket the extra funds.
Losing your vehicle can lead to even more serious problems. Without transportation, you may find it difficult to get to work or perform routine tasks, like grocery shopping or going to the doctor.
Moreover, replacing your car will likely cost far more than you originally borrowed, since most lenders only extend credit for a fraction of the vehicle’s value.
💡 Did you know?
As of 2025, at least 33 states and Washington, D.C., had banned high-cost title loans, though some lenders have found loopholes, like working with banks in other states.
Do title lenders check your credit?
Most title lenders don’t require a credit check or have strict income requirements. Instead, they approve you primarily based on your car’s value.
Because title lenders bank on being able to repossess and sell your car if you default, they frequently have other requirements, though. For example, many lenders require a copy of your keys, or they install GPS and starter interrupt devices so they can locate and disable your vehicle if you miss payments.
Does paying off a title loan build your credit?
Title loan payments usually aren’t reported to the credit bureaus, so paying off the loan doesn’t help you build credit. If you don't pay, the lender probably won't send you to collections, which hurts your credit — it will simply repossess your car and sell it to satisfy the debt.
🤓 Nerdy Tip
Some mainstream lenders offer secured loans and accept a vehicle as collateral. You can still lose your car if you don’t make payments, but the lender considers your credit and income alongside your car’s value. Because the lender assesses your ability to repay the loan, secured loans have lower APRs than title loans — but they’re easier to qualify for compared to traditional loans because you’re putting down collateral. » COMPARE: Best secured personal loans
How to get a car title loan
- Look at borrowing alternatives. Like payday loans, title loans feature triple-digit interest rates and extremely short terms that make repayment difficult. Before you move forward with auto title loans, be sure you’ve considered cheaper ways to borrow. We break down some alternatives in the next section.
- Check your state’s rules. Make sure you verify whether title loans are actually permitted in your state. If they’re allowed, find out the maximum APR a lender can charge.
- Gather required documents. To get a title loan, you’ll generally need a government ID, proof of income and a lien-free title that shows you own the vehicle outright. Depending on the lender, you may also need to provide a copy of your keys.
- Have your vehicle inspected. Title lenders will require a vehicle inspection before giving you a loan. Usually, the inspection takes place in person, though some lenders complete their assessment online. Your loan amount will be based on your car’s estimated resale value.
- Make a repayment plan. Given that borrowers often wind up taking out multiple title loans in quick succession, it’s essential to have a plan to pay off your debt that doesn’t involve rolling over the loan. Consider finding ways to make extra money so you can repay the full balance when it’s due without slipping behind on other bills.
» MORE: What is predatory lending?
Car title loan alternatives
If you’re considering a vehicle title loan, you likely have other ways to borrow money that are cheaper and safer. Consider these car title loan alternatives:
Ask for more time to pay your bills. If you need money for essentials, like rent or your electric bill, consider asking your landlord or utility company for more time to pay. Some lenders and credit card companies will also let you temporarily skip or reduce your payments if you can document financial hardship, like a job loss or illness.
Small loan from a credit union or bank. Several major banks offer small-dollar loans (usually $1,000 or less) with repayment terms of several months to existing customers.
Many credit unions offer payday alternative loans (PALs), which allow members to borrow up to $2,000 and repay it over one month to one year. You’ll need to join a credit union to apply.
Both types of loans are designed to be safer alternatives to high-cost borrowing, so they generally have flexible credit requirements.
Loan from an online lender: Many online lenders work specifically with borrowers who have bad credit (a credit score of 300 to the mid-500s). Keep in mind that bad-credit borrowers are often charged higher APRs; NerdWallet recommends avoiding loans with an APR that exceeds 36%.
If you can’t qualify for an unsecured loan on your own, you may be able to get a secured loan using your car or another asset as collateral. Some lenders also allow you to add a co-borrower or co-signer with good credit to your application.
» MORE: Best loans for bad credit
Pawn an item. Pawnshop loans let you leave a piece of personal property (like jewelry, a computer or musical instrument) with a pawn broker as collateral in exchange for quick cash, usually 25% to 60% of the item’s value. If you don’t repay the loan within a specified window, usually 30 to 60 days, the pawn broker can sell your item.
Like car title loans, pawn loans have triple-digit interest rates. But if you have an item that isn’t essential to your livelihood, there’s less risk compared to an auto title loan.
Get an advance on your paycheck: If you work for a company that offers earned wage access, you may be able to access part of your paycheck early for a minimal fee. Cash advance apps also let you receive some of your paycheck ahead of schedule, but the fees are generally higher.
» MORE: Top cash advance apps
Family loan. If you have a loved one who’s willing to help out, borrowing from a family member or friend can be a low-cost option. Make sure you can afford any repayment terms you agree to, though, to avoid damaging the relationship.
Seek assistance from local nonprofits, charities and religious organizations. In an emergency, some community groups may be able to provide financial help. A good place to start is 211.org, which connects you with resources in your area.
» MORE: 9 payday loan alternatives
Frequently Asked Questions
What is the most you can get with a title loan?
You can usually borrow between 25% to 50% of your vehicle’s resale value with a title loan. Though many lenders advertise loan amounts of $10,000 or higher, a typical title loan is between $2,000 and $3,000.
How much does a title loan cost?
Title loans have an average APR of about 300%, or a monthly finance charge of approximately 25%. Many lenders add on extra charges, like documentation and origination fees, or require you to pay for additional features. If you miss payments, a title loan could cost you your car.
What disqualifies you from a title loan?
You may be disqualified from a title loan if your car isn’t worth much or you don’t own it outright. Not having a verified source of income can also disqualify you, though income requirements are typically lax.
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- 1. Federal Deposit Insurance Corporation. FDIC National Survey of Unbanked and Underbanked Households. Accessed Jun 1, 2026.
- 2. Center for Responsible Lending. Debt Trap Drives the Fee Drain: Payday and Car-Title Lenders Drain Nearly $3 Billion in Fees Every Year. Accessed Jun 1, 2026.
- 3. Center for Responsible Lending. Under the Radar: Evidence of Prohibited Vehicle-Title Loans Made in 22 States and DC. Accessed Jun 1, 2026.
