Car Title Loans

A car title loan is a loan for a small amount of money and for a short time.

To get a car title loan, you give the lender the title to your vehicle – for example, your car, truck or motorcycle. You also pay the lender a fee to borrow the money. You usually have to repay the loan in 30 days.

Car title loans can be very expensive. If you cannot repay the money you owe, the lender can take your vehicle.

What are some other ways to borrow money?

You might be able to borrow money from:

• family or friends
• a bank or credit union
• your credit card

You might ask for more time to pay your bills. You can talk to a credit counselor to get help.

How do car title loans work?

You can get a car title loan online or at a store. This is how they work:

• Step 1: You show the lender:
  • your application
  • your car
  • the title to your car
  • your photo ID

  Some lenders require an extra copy of your car keys or make you buy a roadside service plan.

  • Step 2: If the lender approves your loan, he gives you the money and keeps the title to your car.
  • Step 3: When it is time to repay the loan – usually in 30 days – you pay the lender the amount you borrowed – plus a monthly fee.

  How much does a car title loan cost?

  Lenders charge a monthly fee. This fee can be a lot – sometimes as much as 25% of the amount you borrow.

  For Example

  • You want to borrow $1,000 for 30 days
  • The monthly fee is 25%
  • $1,000 x 25% = $250
  • The amount you owe after 30 days: $1,250

  How do I compare costs?

  Most loans have an annual percentage rate. This is also called the APR. The APR tells you how much it costs to borrow money for one year. The APR on car title loans can be very high.

  When you get a car title loan, the lender must tell you the APR and the cost of the loan in dollars.

  What is an APR?

  APR is based on:

  • the amount of money you borrow
  • the monthly finance charge or interest rate
  • how much you pay in fees
  • for how long you borrow the money

  For Example

  • You need to borrow $500. You plan to repay the money in one year.
  • You compare the costs of borrowing that money:
    • The bank or credit union has a loan with an APR of 7.5%
      • You will pay $21 in interest to borrow $500
      • You will pay $56 in interest to borrow $500
      • You will pay $1,111 in interest to borrow $500

      What happens if I can’t repay the lender when the money is due?

      You might not be able to pay the lender when the money is due. The lender might let you borrow the money for another 30 days. This is called a “rollover,” or “rolling over” the loan. To roll over the loan, you will pay another monthly fee.

      If you roll over the loan several times, you might pay a lot to borrow the money. Eventually, you might not be able to repay the lender.

      What happens if I can never repay the lender?

      If you cannot pay the lender the money you owe, he might take your car. This is called repossession. The lender may sell your car and keep the money.

      If the lender takes your car, you might lose your only transportation. This could make it hard to get to work, school and other places you need to go.