Can You Get A Title Loan on A Financed Car In USA in 2024?

A title loan is a type of secured loan where the borrower uses their vehicle’s title as collateral. The lender takes over the vehicle’s title and takes possession of it in exchange for a short-term loan. The borrower can use their vehicle while repaying the loan. If the borrower defaults on the payment, the lender has the right to repossess and sell the vehicle to recover the loan amount.

A financed car is a vehicle purchased with the help of a loan from a bank, credit union or financial institution. Instead of paying the full amount, the buyer borrows the money for a vehicle and agrees to repay to lender over a specific period with interest. The lender has specific rights on the vehicle until the loan is fully paid off.

Understanding getting a title loan on a financed car is crucial for several reasons, such as financial risk, ownership compliance, high interest rates, and impact on credit score.

So, the borrower needs to assess their ability to repay the loan amount, failure to repay the loan amount can result in the loss of the vehicle. In this blog post we are going to elaborate on the topic can you get a title loan on a financed car in depth. Stay connected

What is a title loan?

A title loan is one kind of secured loan in which the borrower pledges the title of their car as security. The loan is designed for the short term to provide quick access to cash. The lender holds the title and can repossess the vehicle if the borrower fails to repay the loan.

How title loan work?

Here is the working mechanism of the title loan.

1. Valuation: the valuation of the car is assessed by the lender to determine the loan amount. The borrower takes their vehicle to the lender for an appraisal. By this method, the valuation of the car and the loan amount are decided.
2. Documentation: the borrower provides the vehicle’s title proof of identification and possible proof of income. If the lender does not permit loans on financed cars, the title must be clear of claims.
3. Approval: the loan is authorized if the borrower satisfies the lender’s requirements. The lender puts a lien on the title of the vehicle, and the borrower signs a loan agreement.

Loan amount and terms.

The lender offers loans according to the percentage of the vehicle’s current market value, often ranging from 25% to 50%. Title loans have very high interest rates, which can be as much as 300% APR or more. These types of loans have short-term repayment terms of 15 to 30 days. Some lenders offer longer loan terms with higher overall costs.

Repayments

The borrower makes scheduled payments for the principal and interest amount. Payments are typically due within a month, though extensions or renewals may be available at additional costs.

If the borrower fails to repay the loan amount, the lender can sell the vehicle to recover the loan amount. If the car’s selling price does not recover the full amount, the borrower may be responsible for the deficiency balance. 

Can you get a title loan on a financed car?

Yes, it is possible to get a title loan on a financed car, but it is more complicated than obtaining one on a fully owned vehicle. The primary challenge lies in the fact that the original lender holds a lien on the car, which complicates the process of securing an additional loan.

Steps to obtain a title loan on a financed car

Steps to obtain a title loan on a financed car starts with assessing the market value of your car. You can use online tools such as Kelley Blue Book or Edmunds for the current market value of your car.

After analyzing the current market value of your car, check the lender’s policies. Not all title loan lender accept financed cars. Compare interest rates, fees, loan amounts, and repayment terms from different lenders.

Title loan regulations vary by state by state. Check your state’s law regarding the same on financed cars. Gather all necessary documents, such as proof of income, proof of residence, proof of identification, and proof of insurance. Call or visit the lender to discuss your situation.

Confirm that they offer title loans on financed cars and inquire about their specific requirements. Once you find a suitable lender, complete their application process.

The lender will appraise your car to determine its value and loan amount. Review loan agreements, interest rates, repayment terms, and any other charges. Once approved by the lender, you will receive the loan amount. This will be done within a few days. Make sure to pay your loan amount regularly. Failure can result in additional charges.

Once the loan is complete, make sure the title loan lender releases the lien on your vehicle’s title. By following these steps, one can apply for a title loan on their financed car.

Tips to Consider Before Asking for a Title Loan

Here are some tips to consider before asking for a title loan:

Consider Other Options: Look at other loan options, like personal loans or asking friends and family for help. Title loans should only be a last option due to their high risks.

Understand the Risks: Title loans are high-risk. If you can’t repay the loan, the lender can repossess your car. Make sure you fully understand the outcome.

Check Interest Rates: Title loans often have high interest rates. Compare rates from different lenders to avoid paying more than necessary.

Know Your Car’s Value: Lenders will only offer loans based on the value of your car. Make sure your vehicle has enough equity to qualify for the amount you need.

Create a Repayment Plan: Before taking the loan, have a clear plan for how you will repay it. Missing payments can result in losing your car.

Factors affecting the ability to get a title loan on a financed car.

There are a lot of factors which affect the title loan on a financed car. Lenders are more likely to consider title loans if there is sufficient equity on the vehicle. If you own more on your car loan than the car’s value, it will be difficult to get a title loan because there is no collateral value for the lender.

You need to find a lender who offers the title loan on a vehicle because not all title loan lenders accept financed cars. Some lenders may require permission from the primary lien holder before they issue a title loan on a financed car.

State law can affect the title loan on a financed car because some states have stricter rules and regulations than others. It is important to understand your state’s law. Some states have Caps on interest rates and specific terms on title loans.

Pros and cons of getting a title loan on a financed car

Here are some pros and cons of getting a title loan on a financed car.

Pros

1. A title loan provides fast cash within a day. This will help in emergency periods or when financial support is needed.
2. Most of the title loan lenders do not perform a credit check. This will help to poor, who don’t have a credit history.
3. Borrower can use their car while repaying the title loan.
4. A title loan solves short-term financial problems such as unexpected expenses or urgent bills.

Cons

1. Title loans come with high interest rates, which can lead to financial burdens.
2. Failure to repay the loan on time can result in the lender repossessing and selling the car to recover the loan amount.
3. Title loans are for short-term periods, typically 15 to 30 days. It is challenging to pay the full loan within the loan period.
4. Taking a title loan on a financed car can add another layer of debt.
5. In addition to higher interest rates, a title loan comes with various fees and penalties.
6. Defaulting on the title loan can negatively impact your credit score, which will make it difficult to apply for a loan in the future.

Alternatives to title loan on a financed car

One of the best alternatives to a title loan on a financed car is a personal loan. Personal loans from banks do not require collateral, which makes it a safer option. Interest rates on personal loans are lower as compared to title loans. These loans have longer repayment terms.

Credit cards are another alternative to title loans. If you have a credit card, you can use it to get cash in advance. The interest rates of credit cards are higher but typically lower as compared to title loans.

Borrowing money from friends and relatives can be a good option. Loans from friends and families come with little to no interest, making them cost effective. Repayment can be flexible and negotiable based on mutual agreement.

Carefully review your budget to identify areas where you can cut expenses and free up cash. Consider temporary measures such as reducing optimal spending or negotiating with creditors for a lower payment.

So, these are the best alternatives for a title loan on a financed car. one can use these methods to avoid the complexity and high interest rates of title loans.

Tips to borrowers for a title loan on a financed car

Here are some tips for borrowers who can help with a title loan on a financed car. Borrowers should understand how a title loan works, including the terms, interest rates, fees, and repayment schedule. Borrower needs to evaluate their income and expenses to determine if they can afford loan payments or not. Evaluate all the expenses regarding loan and interest rates.

Read the entire loan agreement carefully before signing. If anything is unclear, do not hesitate to ask it. Create a budget that includes loan payments. Avoid late fees that will result in extra charges.

Beware that these types of loans come with high interest rates, which can lead to financial strain. Defaulting on a title loan can result in the loss of a vehicle. This is the major risk the borrower must be noticed.

Use the loan amount for essential expenses or emergencies. Avoid using loan amounts for non-essential things. If possible make an emergency fund to cover unexpected expenses in the future. Develop a long-term financial plan to improve your financial stability and reduce the need for borrowing.

Conclusion

Yes, you can get a title loan on a financed car. Title loans have high interest rates as compared to other loans. One should go with a title loan in an emergency only due to its high interest rates. Before signing anywhere, read the title loan agreement carefully. Read all terms and conditions.

FAQs