How to Use a Car Title as Collateral for a Personal Loan

Using your car title for a loan

Using a car title as collateral for a personal loan is always risky, but it's an alternative to selling the vehicle when emergency cash needs arise. There are two major types of car title loans. The first is open to anyone, regardless of credit or income status, but it's not much more than a typical payday loan. The other type of car title loan is using the vehicle ownership as collateral for a secured personal loan from a bank, credit union or finance company.

Instructions

1. Visit your local bank or credit union with your car title. Ask if it will do a secured loan or line of credit using your car title as collateral. When you use your car title to get a loan, you can still drive the car. However, you are no longer able to have the title because there is a lienholder (the lender). If you do not pay as agreed, the lender will repossess your vehicle because you promised it an interest in the property in exchange for the loan or line of credit.

2. Apply for the secured car title loan if the lender considers such loans. You will be asked to give personal information such as your full name, current and past addresses, home and work phone numbers, birth date, Social Security number, employer, income and reference information.

3. Sign the loan paperwork if you are approved, hand the lender the title and you should receive your check. Once the loan is paid off, you will then get your title back.

4. Visit the website for the bad credit finance company American General and apply for a secured loan if your bank or credit union rejects your loan request. If you are approved by American General, a representative from the company will call you and make arrangements for securing the title, signing loan paperwork and receiving the check.

5. Visit an auto title loan website if you are rejected for a bank loan. Apply for a loan and if you are accepted, use a quick delivery service for paperwork (such as Federal Express) for the title and receive either a check or electronic deposit of loan funds. Alternatively, you could visit a local payday lender or auto title lender and do the same process in person to get the money faster.

Tips & Warnings

• Remember that you will lose your vehicle if you do not pay the loan on time.

• The lender will electronically notify your state's department of motor vehicles that it is a lienholder on the title, but it is usually your responsibility to inform your insurance company and add the lender as an additional insured. This assures that the lender will be repaid in the event of a motor vehicle accident. Once the loan is paid off, you should remove the lender as an additional insured and double-check with your DMV to ensure you are listed as sole owner of your vehicle.

• Do not get a loan from an auto title lender without checking their reputation with the Better Business Bureau. There have been many complaints that some of these companies are predatory lenders.

References

• Better Business Bureau

Resources

• Read this Article in Spanish
• American General
• Turbo Title Loans
• Carbucks