When you’re faced with unexpected bills and need a little extra cash, you may consider taking out a title loan. Traditionally, these loans are offered to people who own their vehicles outright, but what if you’re still making car payments? Can you get a title loan on a financed car?
The short answer is yes—you may still be eligible for a title loan, even if you still owe money on your auto loan. Learn more about title loans and what you need to qualify.
What is a Title Loan?
A title loan borrows money against your vehicle’s value. As a secured loan, title loans don’t determine your eligibility solely on your credit score. In fact, many title loan lenders don’t even run a credit check. Instead, they use your car as collateral when you borrow through the title, helping you qualify when other types of loans may be out of reach.
What You Need to Qualify for a Title Loan
Title loan lenders are known for their flexibility, so many car makes and models are accepted. The newer and nicer your car, the higher loan you can expect to qualify for. Even if you still owe on your auto loan, you could be deemed eligible if the car has enough equity, meaning you have already paid off a substantial amount of your auto loan.
To learn your vehicle’s current equity, subtract the amount you still owe from the current resale value. Remember, cars depreciate over time, so you may have minimal equity for the first year or two after buying a car. This means you may need three or four years of car payments to build up enough equity to qualify for a title loan.
Clear Car Title (If You Have It)
Ideally, you should have a car title in your name if you hope to qualify for a title loan. But auto lenders usually keep the title on file until you pay it off. Your auto lender also puts a lien on the title as long as you still owe them money.
Not all title lenders will extend a loan with an existing lien, but some will. These loans, known as auto equity loans, usually don’t require a clear title. Just be aware that you may not qualify for as much money since you can’t borrow against the car’s full value. But when you’re strapped for cash, a few thousand dollars from an auto equity loan is better than having your title loan application denied.
Finally, you must demonstrate that you have the income to repay your title loan. Proving this may involve presenting pay stubs, bank statements, tax returns, or other financial documents. You may also qualify if you’re receiving welfare or disability payments, unemployment benefits, or other forms of non-traditional income.