Can I Get a Loan Using My Car as Collateral?

If you own a car, truck, or van and need fast cash, you’re in luck. You can use your vehicle as collateral to get a loan and receive quick funds to cover your expenses.

Loans using a car as collateral are known as title loans, and they're typically available through online lenders or title loan agencies.

How do car title loans work?

A title loan is a secured loan that uses your vehicle’s title as collateral. When you’re approved for a title loan, you hand over your title to the lender who then keeps it until you pay off the loan. You can continue driving your vehicle as long as the registration and insurance are up to date. If you are unable to repay the loan in full, the lender can repossess your car to pay off the debt.

Title loans are only available to borrowers who own a fully paid-off vehicle. You can use any type of vehicle for a title loan, including a truck, van, or RV. The loan amount is based on your car’s appraised value, so the more valuable your vehicle is, the bigger your loan will be.

What are the benefits of title loans using a car as collateral?

There are several benefits of applying for a title loan, including:

Easy application process

You can apply for a title loan online or in person. Once you’re pre-approved, you’ll bring your vehicle for an appraisal at the lender or lender’s partner location. The process typically takes a few minutes.

Fast cash

After your car is appraised and you sign the loan agreement, the lender distributes your funds. Since the application and approval processes are fairly quick, you’ll often receive your money by the next business day.

You can keep driving your car

You don’t have to give up your car to take out a title loan. Since the lender only holds your title as your promise to pay, you won’t have to rent a car or depend on friends and family to get where you need to go.

You don’t need good credit for a car title loan

Because car title loans are a type of secured loan, most lenders don't perform a credit check. Since you’re using your car as collateral, the lender is taking on very little risk and doesn't need to base the approval decision on your credit history.

What are the drawbacks of loans using a car as collateral?

While car title loans have several advantages, they also have a few drawbacks:

You must own your car

It's important to note that you can only apply for a car title loan if you own your vehicle free and clear. You can't use a leased vehicle or one you’re still making auto loan payments on to apply for a title loan. That’s because the lender can't legally take possession of a vehicle you don’t own if you fail to repay the loan.

You risk losing your vehicle 

If you can't pay off your loan – plus interest – your lender can legally repossess your vehicle. If you only own one vehicle, that means losing your sole means of transportation. This could put you out of a job or force you to rely on rideshares.

High interest rates

Even though you're using your car up as collateral, title loans can still carry high interest rates. Rates vary from lender to lender, but if you choose one with high interest rates and fees, you increase the risk of being unable to repay the debt.

They aren't available everywhere

Car title loans may not be available where you live. Certain states have regulations against certain types of loans, which means you’ll need to pursue other options.

Are there alternatives to car title loans?

If title loans aren’t offered in your area, or you don't like the idea of using your car as collateral, there are alternatives worth considering:

Payday Loans

A Payday Loan, also known as a Cash Advance, is an unsecured small-dollar loan, typically less than $500. Payday Loans are given as a lump sum that you repay in full on your next payday. These loans are ideal when you need a small amount of money to quickly cover expenses or emergencies.

Installment Loans

If you need more money than you can get with a Payday Loan, you can opt for an Installment Loan. Installment Loans are not only easy to apply for, but some lenders don't even check your credit.

With an Installment Loan, you receive your funds as a lump sum. You then repay the amount you borrowed in regular installments over an extended amount of time —usually a few months depending on the repayment terms.

Lines of Credit

If you need ongoing access to money rather than a single lump sum, consider opening a personal Line of Credit. Lines of Credit are somewhat like credit cards in that you can borrow money up to your credit limit. You can withdraw funds as needed or leave your account untouched until you need it for a rainy day.

The advantage of Lines of Credit is that you can leave your account open for as long as necessary. You'll also only pay interest on the money you withdraw, not the entire credit line.

Sell your vehicle

If you’d rather not take out a loan and you have more than one vehicle, you might consider selling one for extra cash. Depending on how much you get from the sale, you can put part of the money toward purchasing a more affordable car and use the rest to pay your expenses.

Explore unsecured Personal Loans with Advance America

If you’d prefer to take out an unsecured loan that doesn’t require collateral, Advance America offers Payday Loans, Installment Loans, and Lines of Credit. We’re happy to work with borrowers with all types of credit. Compare our options and apply for the money you need today!

The Advance America advantage

Since 1997, Advance America has helped millions of hardworking people with a variety of financial solutions including Payday Loans, Online Loans, Installment Loans, Title Loans and Personal Lines of Credit.
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