4 Advantages and Disadvantages of Title Loans


It can be hard when you’re facing an unexpected financial issue. Have you recently stayed at the hospital and need funds to pay the costly bill? Or perhaps you’ve suffered some major damage to your home and need a loan for quick repairs.

There are many reasons as to why you might find yourself in need of an emergency loan, but whatever your particular reason may be, title loans are an option to consider – but are they worth it? Here are some pros and cons of title loan funding.

1. Pro: You Could Get Funds Fast

When you are faced with a funding emergency, the last thing you want to do is wait patiently for the emergency money that you need. That’s where a title loan could come in handy. One advantage of title loans, that also distinguishes them from other forms of lending, is how fast it is for eligible borrowers to receive the money they need. A lot of title loan options are able to fund borrowers in as little as one day!

What’s more, because you are putting up the title to your car as collateral, you don’t need to go through a rigorous screening process and justify your past financial history. But even though you use the title as collateral, you may continue to drive the car during the repayment process. And once the title loan is repaid in full, the car title is swiftly returned to you.

2. Con: You Might Lose Your Car

With any type of secured loan, there is a risk. By using an asset to secure fast funding, you must abide by the terms and keep up on your monthly payments or risk losing that asset. While it’s certainly true that title loans come with better options for borrowers on account of the added security for lenders, its always a big gamble to use your car as collateral. As such, it’s a move you’ll want to think over before making a final financial decision.

Losing your car would be a huge con. Not only would that rob you of perhaps your greatest remaining asset, but it would likewise leave you in a position where you do not have access to reliable transportation.

But not to worry! There are plenty of ways to ensure you do not lose that valuable asset:

  • Stay on top of your monthly payments
  • Keep a line of communication open with your lender
  • If you’re having financial difficulties, reach out to the lender

3. Pro: You Can Apply with Bad Credit

Bad credit can restrict you from making many types of financial decisions, such as getting a title loan to deal with a financial crisis. But having bad credit doesn’t mean you are automatically ineligible for the money you need.

Many individuals with bad credit turn to title loans for funds because of the flexible qualification requirements. As this type of loan is secured, the rates of approval are typically higher than they are with traditional loans from banks or credit unions.

If you’re hesitant to apply for funding for fear of getting rejected, know that title loans could be a good option to look into. Don’t feel like you’re unable to take part in so many of life’s most important financial decisions because of bad credit. A title loan typically allows you to take out a much-needed loan even if you have bad credit. 

4. Con: You Might Face High Rates

As title loans are fast loans with high approval rates, interest rates can be high. If you use collateral to obtain a loan, rates may be more affordable than they would be with unsecured loans. But the rate you ultimately are able to acquire is dependent on the lender you choose to work with, so be sure to do your research and make comparisons before making a final decision.

There are distinct pros and cons to the title loan industry. Whether a title loan would be beneficial for you or not is determined by how well these pros and cons balance out for you.