How to get the best car title loans

Getting a loan and accessing credit is not easy with a poor or limited credit history. Loans are important financial tools when you need to come up with a large sum of cash quickly for an emergency.

Borrowers without a sufficiently high credit score to get a loan sometimes turn to car title loans. In fact, did you know that 15,000 people search "car title loans" per month in Canada? On a regional basis, these searches are most popular in B.C with 1,800 monthly searches for "car title loans Vancouver".

If you find yourself in a situation where you own your car outright and need cash quickly, a vehicle title loan may be an option for you. These loans are taken out against the borrower's car. This ensures that you will repay the amount you borrowed.

This guide will explain what a car title loan is, how they work, how they differ from a personal loan and the pros and cons of getting a car title loan. 

What is a car title loan?

Car title loans, also known as auto title loans or vehicle title loans, are secured personal loans. Canadians can use them to access credit quickly. Similar to a personal loan, they are repaid in instalments over time, plus interest. However, unlike personal loans, they are secured by placing a lien on the title of your car. If you are unable to keep up with payments, your lender has the right to seize your car to recover the unpaid amount. 

To qualify, you only need to own your car outright and have finished paying off its loan.

Title car loan lenders may or may not take into consideration your credit score. Even with a poor credit history, it is relatively easy to qualify for this type of credit because of the collateral involved. Loans against a car title can usually be obtained in a day or two, making it a viable short-term money solution.

Watch out!

While car title loans may sound like an easy and quick way to get cash, we advise consumers to proceed with caution. Do your research and read the fine print prior to taking out a car title loan. This can be a very expensive way to borrow.

How to get a car title loan?

If you need to get a car title loan there are just a few steps to applying for a car title loan.

First, gather all necessary documents:

  • Proof of income
  • Vehicle title
  • Proof of insurance
  • Proof of identification
  • Vehicle inspection

Once you have gathered all of your documents, you will need to find the right lender. Get a free quote using at the top of this page.

After comparing lenders and reviewing your offers, your lender will help you with their specific application process. Car title loans are fast. Once your application is sent, you should have an answer approval within a few hours to a few days, depending on the lender.

How much can you get with a car title loan?

The amount you can get with a title car loan will be dependent primarily on the lender's policies and the value of your car. Your lender will assess your vehicle to determine how much to lend you.

Online car title loan lenders will typically lend you 25-50% of the resale value of the car, but some lenders may go as high as 75%. Loan amount can be as little as $400 or as much as $35,000. Obviously, the largest loans require an equally valuable vehicle to back them up. Individual lenders have different ranges.

For example, if your car is worth $5,000 on the resale market, then the lender could loan you up to a maximum of $3,750, or 75% of the resale value of your vehicle. $1,500 to $2,500 is, however, a more realistic target,

While receiving a lump sum could help during an emergency situation, beware of high interest rates. Interest rates can make it difficult to keep up with the monthly payments. For example, in Ontario, the interest rate on a car title loan could legally be as high as 60% APR.

Take a look at this breakdown of borrowing $5,000 over two years compared to borrowing $10,000 over five years, assuming the APR is the maximum 60%. 

Loan DetailsLoan ALoan B
Loan Amount$5,000$10,000
Interest rate60%60%
Loan Term2 years (24 months)5 years (60 months)
Total of loan payments$8,696.51$31,696.91
Total Interest$3,696.51$21,696.91
Monthly Payment$362.35$528.28
Comparison of repayment terms on two car title loans at 60% APR

As seen in the example above, the high interest rates can mean paying double, if not triple, your original loan amount over the life of the loan. High monthly instalment payments can cause further financial damage over time if you are unable to pay them off.

If you are considering a car title loan, shop around first! Save on interest rates by borrowing small amounts and on the short loan terms can save you significantly. Here is how the same loans look with a 25% interest rate.

Loan DetailsLoan ALoan B
Loan Amount$5,000$10,000
Interest rate25%25%
Loan Term2 years (24 months)5 years (60 months)
Total of loan payments$6,404.58$17,610.79
Total Interest$1,404.58$7,610.79
Monthly Payment$266.86$293.51
Comparison of repayment terms on two car title loans at 25% APR

That is a big difference! The two-year $5,000 loan costs $2,292.93 less at 25% than at 60%. The five-year $10,000 is an incredible $14,086.12 less expensive at 25% than at 60%.

What credit score is needed to get a car title loan?

Since title loans are secured, they come with less rigid requirements than traditional personal loans. This means that even if your credit score is not as strong as you would like, you can still get approved.

This is a big difference compared to traditional loans and credit requests. Lenders will often turn down potential borrowers for those based on their credit score.

Good to know

Good news! When paid off in time, car title loans will improve your credit score and make it easier to access more traditional credit the next time you borrow. Just verify that it is reported to Canadian credit bureaus.

How long are car title loan terms?

Car title loan terms from online lenders are usually anywhere from 4 to 60 months. Each lender has its own rules. Some local lenders may offer short 30-day loan terms, but be careful. Make sure you are working with a lender you trust

The term length plays a big role in how much a title loan will cost you. With high-interest rate loans, it is always best to go for the shortest term and highest monthly payment you can comfortably repay.

What are the pros and cons of a car title loan?

Does it feel like obtaining a car title loan may seem too good to be true? In some cases, it may be, but in others, it can be a viable option during an emergency when you are strapped for cash. Here is a breakdown of the benefits of car title loans and what to watch out for.

Pros:

  • Quick access to money even with less-than-perfect credit history
  • Easier to get approved than unsecured loan
  • Fast approval
  • Interest rate better than payday loans
  • Build credit if lender reports payment history

Cons:

  • You can lose your vehicle for non-payment
  • Need a paid-off recent vehicle (fewer than 8 years)
  • High application fees
  • Very high interest rates vs traditional lending for borrowers with a good credit score
  • Vehicle may have to be outfitted with GPS or car immobilizer 

Car title loans vs personal loans

A personal loan and a car title loan share some similarities. In fact, a vehicle title loan can be thought of as a type of personal loan.

Both get you a lump sum of cash upfront. While traditional personal loans are often unsecured, car title loans are secured. Your vehicle is used as collateral. A lien is placed against it to secure the loan.

A high credit score and regular income are required to get most personal loans. For personal loans, the borrower's credit history assures the lender that it can trust them to repay the debt. Personal loan applicants can be approved for higher amounts and at lower interest rates.

Car title loans require borrowers to put a car up as collateral in exchange for the loan. The other big difference is in the terms themselves. Expect a loan for less than your car is worth (usually 25-50%). The annual percentage rate will be much higher as the lender perceives more of a risk in lending you money.  

Good to know

See our personal loan guide to learn more about personal loans and see if you qualify.

How can I get out of a car title loan?

Typically, the only way to get out of a car title loan is to pay off the loan. The faster you pay your loan off, the less interest you will pay. Check your terms first, but many lenders will allow you to increase your monthly payments or pay off your loan completely without a penalty.

Car title loans are a risky form of credit. Remember, if you default on payments, the lender has the right to seize your vehicle. A default is doubly damaging as it will hurt your credit score. If you are trying to rebuild your credit or build credit history with a car title loan, defaulting will do more harm than good. Make sure to budget accordingly to pay off the loan, as soon as you can, to avoid potential financial and credit consequences. 

Alternatives to vehicle title loans:

A car title loan may seem like a quick debt relief option, but it can be a very expensive way of borrowing. Consider pursuing alternatives first.

If you do not want to secure a loan against the title of your car or are unable to, there are some other ways to obtain a loan or free up cash flow would be:

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