Breaking Down Online Title Loans

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Are you thinking of taking an online title loan but not too sure what it is and how it works? An online title loan is a secured loan, which means that taking out one may involve a check of your credit score. The lender reviews your online application and any necessary documents, before appraising your car. Once approved, you can get cash in return for your car title. However, the loans can also mean expensive costs, short repayment terms, and a chance you may lose your car.

For those running low on cash, online title loans seem like a useful and easy option. Every year, many people turn to online title loans to borrow money by using their cars as collateral. The title to your car is given to the lender during the duration of the loan. It is meant for emergencies or for covering other urgent expenses. The title will be under the lender until the loan has been repaid in full. It seems like a convenient and easy option as not all online title loans necessitate a credit check and you can even get the money on the day you take out the loan. You can even continue to use your car even as you repay the loan. However, borrowers need to be careful of the pitfalls of online title loans which can trap them in cyclical debt.

Breaking Down the Term

Car title loans are based on how much money your car is worth. The amount you can borrow depends on various factors including who the lender is, the value of the car, and the laws surrounding the loan. Typically, you may borrow from $100 – $10,000 with the average at about $1000. It is a simple and convenient way to get cash as the process can be done online and can be checked electronically once you have an account to keep up with your payments and balance. The loans can be paid over various periods, from a month-long to over a year. The exact period depends on the laws specific to your region. The loans can be costly, coming in at about a 300% annual percentage rate. With such high numbers, you need to consider carefully if you want to take up an online title loan after all.

How To Get an Online Title Loan

So how do you go about getting an online title loan? Here’s how the average person may go about applying for an online title loan.

  • Car Title: You’ll need a clear and free title.
  • Complete the online application: You can complete this process online and you usually need to upload some supporting documents including a photo ID, proof of income, address, insurance, etc to go along with it.
  • Review: It will take some time for the lender to review your application and appraise your car. You may be contacted by the lender for a few questions regarding your application and the car. Sometimes, this may take place face to face and the lender may visit you at home or request that you bring the car to a store for a review.
  • Signing the contract: Once approved, you will be able to sign the contract electronically and hand over the title of your car.
  • Getting the money: Now that the contract is signed, you can get your money, with some lenders directly transferring the money into your bank account.

Once the loan has been approved, the lender will keep the title to your car until your debt is repaid. You can still hold on to your car, but you must continue to pay off what you owe.

What Are the Risks?

Although online title loans seem great with the convenience and fast cash, there are some drawbacks and pitfalls you need to be careful.

High Debts

The loans often come with high fees and interest rates as borrowers cannot repay the loan in time. If this happens, some lenders may offer to “roll over” the loan, for an additional fee. When this happens consecutively, debt can build up for borrowers. Many loaners, especially those who roll over their title loans at least six times, end up being in debt for longer than they had planned.


The fees that you pay for the loan may end up being much more than what you borrow. On average, borrowers pay around $1200 in fees over a year for a $1000 loan. With the loans, lenders will charge you either fees or interest, which are both bad for your wallet.


Since you’re getting the loans online, you need to be aware of potential online scams and stay alert when dealing with someone whom you don’t really know. There have been cases of predatory lenders who have hidden fees or hide their terms on their sites, making it hard for borrowers to understand what they are really getting into.

Losing Your Car

If you cannot make your payments and default on the loan, your lender can seize your car. For those who use their car as transportation and get their car seized, it can pose problems and worsen their financial situation without reliable transportation.

Possible Alternatives

Before you proceed to take out an online title loan, experts suggest that you should look to alternative methods of loaning and avoid online title loans if possible. That is to say, online title loans should be a last resort. Here are some possible alternatives if you are looking to take an online title loan but you don’t know if you should.

  • Credit Cards: Some credit cards may offer an unsecured line of credit, also known as a cash advance. These are short-term loans that you take out against your credit card’s available limit. However, they tend to be expensive.
  • Personal Loans: You can consider taking out a personal loan instead, as quite a few lenders offer them as well. The loan terms and approval rate depend on a variety of factors. Before you do apply and take up the loan, be sure to check that the payment plan is sustainable for your budget. With an unsecured loan, you will not risk losing your vehicle or other properties.
  • Payday Alternative Loans: Payday loans are possible alternative options with a few federal credit unions, that offer them ranging from $200 to $1000. The good thing is that interest rates cannot exceed 28%. You must also repay the money within six months.

So Is It For You?

Online title loans are no doubt fast and easy ways to get cash upfront. However, borrowers can end up paying more than what they had pictured at the start. Thus, you need to be careful of the potential risks and beware of reborrowing to make the payments. One way to avoid the risks is by reading up on title loans online from TFC to educate yourself and keep your money safe!

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Samantha Acuna is a writer based in San Francisco, CA. Her work has been featured in The Huffington Post,, and Yahoo Small Business.