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What is Title Loan & How it Works?

Title Loans in Texas, United States
Written by Suprabhat

Loan comes in many forms and all have varied terms and conditions. Some loans have only simple verbal agreements between family members. While some loans require quite complex arrangement with lending institutions. It means lending money for significant items such as car, property etc. If you need loan for any essential item to make your life more easier and manageable, then you must know how loan works. Today we will be focusing more about Title Loan.

What is Title Loan?

Title Loan is a type of secured loan where borrowers can use his/her vehicle title as collateral. In United States, Title Loan is also known as “Car Title Loan“.  In car title loan who gets the loans i.e borrower must allow the lender to put lien on car, and temporarily surrender the hard copy of car title, in exchange of loan amount. As soon as the loan is repaid, lien on car is removed and the original hard copy of the car is returned to its owner again. If borrower found to be defaulter or unable to repay the loan, the lender is liable to sell it to repay the borrower’s outstanding debt.

Car Title Loan in Texas

These kind of loans are short term and posses high interest rates as compared to other source of loan. In these type of loans lenders generally never check the credit history of borrowers, they only consider the value, quality and condition of the vehicle which is going to be on lien to borrow money.

Most of the car title loans in united states can acquired within 15 to 30 minutes or less on an amount as little as $100. Most of the financial institutions doesn’t allow loan under $1000 to anyone without credit as these will be non profitable and too risky. In addition of verifying borrowers vehicle hard copy, lender may verify that whether the borrower has some source of income or not. But they rarely consider borrowers credit history or score.

How Car Title Loan Works in Texas, United States?

To get Title loan borrower can look for lender online or at a store location. In order to get the car title loan the borrower will need to have some required documents like: valid government issued ID such as Driver License, Residential Proof, Car Registration, Car insurance etc. To get title loans in texas, borrowers vehicle must have car insurance.

Maximum amount of loan is basically determined by the collateral. Normally lenders offers up to half of the car resale value, though very less amount of lenders allow more than that. Resale value of the vehicle is determined by lenders using the Kelley Black Book. It is required that borrower must hold the clear title of the car i.e no liens or current financing should be there.

Based on the location of lender the interest rates on loan may vary from 36% to 100%. Payment schedule may vary a little as the borrower has to pay the interest due to every each due date. At the end of the loan term, full amount may be due in a single payment as well. In case the borrower is unable to pay the full amount, then they can roll the balance over and take new title loan.

If borrower cannot pay back or get late with their payment, the lender may take possession of the car and sell it. Typically lender take this option at last, as the whole process take months to recover the amount. Most of the states have specific rule like: Lender have to hold vehicle for 30 days to allow the borrower to recover it by paying the balance. Any amount over the loan value collected from the sale is returned back to the defaulter.

What Vehicles Can Be Used to Get a Title Loan?

Below is the list of all the vehicles which can be used to get title loan:

  • Car
  • Van
  • Street Bike/ Motor Cycle
  • PickUp Truck
  • Trailer
  • Titled Boats
  • Any On-Road Vehicle
  • Limousine

Some vehicle which cannot be used to get title loans are mentioned below:

  • Watercraft (non-boats)
  • Golf Cart
  • Dump Truck
  • Electric Cart
  • Bus
  • Semi
  • Four Wheeler/Quad ATV

This was all about Car Title Loans in United States and How it works over there. Let me know if you think I can add some more points to help you in understanding it better in comments below.

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About the author

Suprabhat

Hi I am Suprabhat Mondal CEO and Owner of MoneyGossips I had been online since 2012 and had been helping many startups, bloggers to achieve what they want to.
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1 Comment

  • It’s actually a great and useful piece of info about the Title Loan ,and creatively formed How it Works?. I’m happy that you just shared this useful info with us. Please stay us informed like this. Thank you for sharing.

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