Title Loans: Are They Worth the Cost?

August 1, 2019 by Justin Weinger

There often comes a time in your life when you’re faced with an unexpected emergency. Reasons behind these situations are endless and can include anything from medical bills to home evictions. In most cases, these emergencies require you to have cash immediately.

In a perfect world, everyone is ideally supposed to have emergency funds for such situations. But the reality is not all of us have hefty salaries that allow you to set aside a portion as savings every month. Your only other feasible option that can give you immediate funds is to apply for a title loan.

What is a Title Loan?

This is a secured loan that provides you with that much needed cash—fast. But you have to use your car as collateral just in case you default on the repayments.

Lenders seldom conduct credit checks with this type of loan. They aren’t strict regarding eligibility to apply for these loans. Certain financial institutions even allow you to apply for title loans without proof of income. As a result, this type of loan is usually ideal for people who in most cases have:

  • Bad credit
  • Low credit
  • No credit

The above factors are clearly undesirable for any borrower. And though there are financial institutions that’ll give you that short-term loan to cover any emergencies, there’s always a catch. You’re charged high interest rates since you’re considered a risky borrower, monthly fees may also be high, and you risk losing your car.

How Much Do Title Loans Cost?

We understand that certain situations leave you with no option but to apply for a title loan. But that doesn’t mean you should do so blindly. It pays to know the general costs involved with applying for such a loan. This way you know exactly what is expected of you and what you’re getting yourself into.

When you apply for a title loan, you’re often charged an interest rate of 25% monthly.  It may not sound like much when compared to other types of personal loans. But if you have bad credit, the Annual Percentage Rate (APR) comes out to 300%. Alarming, right?

Will A Title Loan Affect Your Credit Score?

Generally, title loans won’t affect your credit score. Is this a good or bad thing? Title loan lenders don’t report your payments to the credit bureaus. This means that even though you don’t default on your payments, your credit score won’t improve.

Words of Advice

While paying off your title loan, there are measures you can take to help build your credit. These include:

  • Using a credit card: This is an effective way of building your credit without paying any interest. Just make sure you keep your credit balance low and aim to pay it off in full each month.
  • Pay your other loans in a timely manner: By paying your other loans on time, you significantly improve your credit score.
  • Rectify credit report errors: it’s not uncommon for credit report errors to occur. If left unattended, this can negatively affect your credit score. Always analyze your reports to check if there are any errors.


Title loans come in handy in emergency situations and if used wisely they can save you in dire situations.

Tip: use a loan as the first step in trying to eliminate bad financial habits. Pay it off and in doing so, learn healthy financial habits.

The future may be brighter than you think it is.

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