How do title loans work?

By Lenditup Editorial Team · Last reviewed October 11, 2026 · How we verify

You borrow against a car you own and keep driving it. The lender takes a security interest in the title, you repay the loan plus interest or fees, and the title is cleared when you pay in full. If you don't repay, the lender can repossess the car.

What is a title loan?

A title loan is a secured loan in which your car, truck or motorcycle is the collateral. Instead of relying mainly on your credit history, the lender looks at what the vehicle is worth and lends a share of that value. You keep using the vehicle while you repay. The lender either holds the paper title or records itself as a lienholder with your state's motor vehicle agency, so you cannot sell the vehicle until the loan is paid. Because the lender can take the vehicle if you default, title loans put a major asset at risk, and most carry far higher rates than bank or credit union loans.

How does a title loan work, step by step?

Most title loans follow the same path: you apply, the lender values the vehicle and checks your details, you receive a written offer showing the APR and total cost, you sign and the lender records its claim on the title, you get the money, and you repay on the schedule in the contract. Once the balance reaches zero, the lender returns the title or releases its lien.

1. Apply. You give your details, your income and the vehicle's year, make, model and mileage.
2. Vehicle check. The lender confirms the vehicle's condition and value, in person or from photos, and checks the title is in your name.
3. Offer. The lender offers an amount, usually less than the vehicle is worth, with a written disclosure of the APR, finance charge and total of payments.
4. Sign. You sign the contract and hand over the title, or the lender is added as lienholder.
5. Funding. You receive the money by cash, check or bank transfer, depending on the lender.
6. Repay. You pay in one lump sum when the term ends or in installments, as the contract and state law allow.
7. Title back. When you've paid in full, the lender returns the title or releases the lien.

How much does a title loan cost?

The cost depends on your state's law and the lender. Some states cap title loan rates fairly low, some allow rates in the hundreds of percent a year, and a few set no cap at all. A 2016 study by the Consumer Financial Protection Bureau of almost 3.5 million single-payment title loans found the typical loan was about $700 with an APR of about 300%. [1] Always compare offers by APR and by the total you will repay.

Worked example (an illustration, not an offer):

1. You borrow $700 for 30 days at a monthly fee of 25% of the loan.
2. The fee is $700 × 25% = $175, so on day 30 you owe $875.
3. Over a year, 25% a month works out to an APR of about 300%, which the lender must show in its written disclosure.
4. If you can only pay the $175 fee and roll the loan over, you still owe $700 next month. Four rollovers cost $700 in fees, as much as you borrowed, and the debt is still there.

Lower-cost states look very different. Under Florida's title loan law, borrowing $1,000 for 30 days costs $25 in interest (30% APR). Check your state's rules on the state title loan law table.

What happens when a title loan is due?

On a single-payment loan, the whole balance plus the fee or interest is due on the due date, often 30 days after you borrow. If you can't pay it all, some states let the lender renew the loan: you pay the fee, the loan starts again, and the full balance is still owed. The CFPB found that more than four out of five single-payment title loans were renewed on the day they were due rather than repaid. [1] Installment title loans spread the cost over regular payments instead, which avoids the lump sum but can mean paying interest for longer.

What happens if you can't repay?

If you default, the lender can usually repossess the vehicle and sell it. Some states first require written notice and a period in which you can catch up on missed payments. Some also stop the lender from collecting any balance the sale didn't cover, while others let it sue you for the difference. In the CFPB's study, one in five single-payment title loan borrowers had their vehicle seized. [1] If you think you'll miss a payment, contact the lender before the due date and ask what options it offers. Your state page shows the notice and deficiency rules where the law sets them.

How do you get your title back?

You get the title back by paying the loan in full, including any fees allowed by your contract. If the lender held the paper title, it returns it to you. If it recorded a lien, it must release the lien with your state's motor vehicle agency; keep the payoff receipt and the lien release until your records show you as the sole owner. If the title doesn't come back within a reasonable time, ask the lender in writing and contact your state regulator.

How does a title loan compare with other options?

A title loan is one of several ways to borrow small amounts quickly. The main differences are what secures the loan, how long you get to repay and what you can lose. A personal installment loan is usually unsecured, so your car is not at risk; a payday loan is tied to your next paycheck; a pawn loan means handing the item over.

Read more about personal installment loans.

How should you compare title loan offers?

Compare the written disclosures, not the advertised monthly payment. The Truth in Lending Act requires lenders making consumer loans to show the APR, the finance charge, the amount financed and the total of payments before you sign, so you can put offers side by side. Then check the contract terms that change the real cost.

• APR and total of payments, the two figures that let you compare the full cost of different offers.
• Renewal terms: whether the loan can be rolled over, and what each rollover costs.
• Early payoff: whether there is a prepayment penalty. 11 of the 44 states and DC we cover ban one.
• Default terms: the notice period, repossession fees, and whether you could owe a balance after a sale.
• The lender's license, which you can check with your state regulator or NMLS Consumer Access.

In 15 of the 44 states and DC we cover there is no law written for title loans, so car-secured loans follow ordinary consumer-loan rules. Find yours in title loan laws by state, and see what lenders ask for before you apply.

Ready to compare offers?

Start a title loan request

Lenditup is not a lender. Sending a request does not mean you will be approved; each lender sets its own rates and terms.

Title loan questions

Sources

1. Consumer Financial Protection Bureau, Single-Payment Vehicle Title Lending (May 2016), and its press release. Based on loans made from 2010 to 2013.
2. Truth in Lending Act disclosures: Regulation Z, 12 CFR Part 1026.
3. State rules: the Lenditup state title loan law table and its methodology.