Understanding Car Equity Loans: What You Need to Know

Learn everything about auto equity loans, including how they work, eligibility requirements, repayment terms, and popular lenders. This secure borrowing method uses your vehicle's title as collateral, offering quick funds but with high interest rates and specific state restrictions. Understand the risks and benefits before considering an auto title loan.

Understanding Car Equity Loans

Introduction to Car Equity Loans

A car equity loan is a secured financing option that allows vehicle owners to borrow money by using their car's title as collateral. To secure the loan, the borrower places a lien on the vehicle’s title, which serves as a security interest. The borrower then hands over the vehicle’s title to the lender temporarily in exchange for the loan funds. Let’s explore more about these loans through common questions below:

How do car title loans operate?

Often called auto title loans, these involve borrowing a small sum for a short duration.

The borrower provides the vehicle’s title to the lender.

Repayment periods typically span 30 days.

A key aspect of these loans is that if the borrower defaults or cannot repay on time, the lender can seize the vehicle in exchanged for the unpaid balance.

Are auto title loans permitted nationwide?
Due to their short-term nature, high interest rates, and lump-sum repayment structure, these loans are available only in select states (25 in total). Here are some states where title loans are legal:

Alabama

Arizona

Delaware

Florida

Georgia

Illinois

Missouri

Nevada

Tennessee

Texas

Wisconsin

What does an APR indicate for these loans?

The Annual Percentage Rate (APR) reflects the total yearly cost of the loan considering interest and fees.

Car title loans generally carry an average APR of around 300%, which can triple the amount owed compared to the borrowed sum.

Since these loans are typically short-term—around a month—the interest rate of approximately 25% per month causes the APR to accumulate rapidly through rollovers.

What are the basic requirements for obtaining a car title loan?

Applicants must be at least 18 years old and possess a valid government-issued ID.

A lien-free vehicle title in the applicant's name and proof of steady income are also essential. Income can include employment, pension, unemployment benefits, or other reliable sources.

Once eligible, applicants can apply either in person at a local branch or online via various websites.

In-person applications allow immediate vehicle inspection and instant loan offers from lenders.

How is repayment handled for car title loans?

After approval, the lender provides a repayment schedule detailing due dates.

Repayments can be made via cash at branches or by debit card.

One advantage is that borrowers often can pay off the entire loan in one payment without penalty.

Popular auto title lenders to consider include:

CashNetUSA

Speedy Cash

Check Into Cash

TitleMax

LoanMart

TMG Loan Processing

Important Notice:

The information provided here is compiled from research, expert insights, and available data. Variations may exist based on individual lenders or changing financial laws. We recommend consulting a financial advisor before proceeding, as details and regulations may change over time.