Understanding Auto Title Loans


As with home loans and personal loans, there are many different varieties and subcategories to explore when it comes to auto loans. The auto title loan, for example, which is also occasionally referred to as car title loan and pink slip loan, is a secured loan for which the borrowers supplies their vehicle as collateral on the loan. In this case, the collateral takes the form of the title or pink slip that represents ownership of the vehicle in question.

In order to receive an auto title loan, the borrower must permit the lender to place a lien on the title of the vehicle itself, surrendering this title for the length of the loan. Upon repayment of the loan, typically at the point when the loan reaches the end of its duration, the lender will remove the lien and the return the vehicle title. If however the consumer ends up defaulting on the auto loan, the lender will be able to claim the vehicle. They will then sell it on so as to cover the borrower’s outstanding debt.


“In order to receive an auto title loan, the borrower must permit the lender to place a lien on the title of the vehicle itself, surrendering this title for the length of the loan.”

The Features of Auto Title Loans

Here are some brief characteristics commonly associated with auto title loans:

  • They involve the use of the borrower’s vehicle as collateral for the loan, passed to the lender in the form of a car title, or pink slip.
  • They are an attractive prospect for lenders, since they have a good chance of recouping the money they pledge, even if the borrower defaults on the loan.
  • They are short-term loans, typically around 30 days in duration, and as such tend to carry a higher interest rate than other options.
  • They are an expensive alternative, and are often seen as a last resort for borrowers looking to secure funds quickly.
  • Lenders do not typically consult the borrower’s credit history before committing. They are more concerned with the current condition and value of the vehicle in question.
  • Similar to payday loans, which are also often seen as a last resort, lenders will consider whether or not a borrower has a regular source of income.


The Benefits of Auto Title Loans

Below are a handful of advantages that come with auto title loans:

  • Auto title loans are designed as a last resort for a borrower to attain funds quickly, therefore are made very accessible to even the least reliable of borrowers. They can be applied for in a number of ways without meeting with the lender, and can be granted in a matter of hours. The typical processing time for an auto title loan is 24-48 hours from when it has been applied for to when it is received.
  • The only prerequisite associated with applying for an auto title loan is that you own a car. Anyone who owns a car may apply. This is because there is no credit or background check, since the loan is secured – it is based on collateral. The main thing a lender will consider is the value of this asset, for this is their only risk. As such, auto title loans have high approval rates.
  • Of course, another benefit is that, while you effectively sign over a lien on the vehicle, it is not taken away from you. You still get to keep and drive the car for the duration of the loan, though you will have to provide the title and a pair of keys to the lender before receiving your money.

The Drawbacks of Auto Titles Loans

Here are some of the principal disadvantages of auto title loans:

  • Auto title loans are very expensive. Initially the interest rate is manageable, but every month you need to extend the loan, the rate will rise to considerable levels. If you are borrowing a larger amount, it might be difficult to pay it back in the time period given, which will cost you a lot more.
  • Obviously, the main risk to the borrower is that there is a chance you will lose the asset you have put up for collateral. It is a risky process, and very much a gamble. If you are inundated with unforeseen expenses and are unable to meet the terms of the loan, you may lose your vehicle, which may make life difficult.

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