Car Title Loan

AAA

DEFINITION of 'Car Title Loan'

A short-term loan in which the borrower's car title is used as collateral. The borrower must be the lien holder (i.e. own the car outright). Loans are usually for less than 30 days. If the loan is not repaid, the lender can take ownership of the car and sell it to recoup the loan amount.

These loans are also known as "auto title loans" or just "title loans".

INVESTOPEDIA EXPLAINS 'Car Title Loan'

Car title loan lenders often target those with low incomes and bad credit and charge high interest rates; those with access to credit cards or bank loans would not be the target customers. Car title or auto title lenders are sometimes called "predatory lenders" because of the way in which they prey on those who need cash in emergency situations.

Although lenders must state the interest rate at the time the loan is made, if it is a short-term loan, the borrower may not realize that the quoted rate is not annualized. For example, if a one-month loan rate is advertised at 25%, that annualized rate is actually 300%.

RELATED TERMS
  1. Collateralized Loan Obligation ...

    A security backed by a pool of debt, often low-rated corporate ...
  2. Selling Out Of Trust

    A term commonly used in the automobile industry to refer to the ...
  3. Clunker

    A popular reference to the old vehicle traded in under the U.S. ...
  4. Cash For Clunkers

    A program that allows car owners to trade in their old, less ...
  5. Lien

    The legal right of a creditor to sell the collateral property ...
  6. Collateral

    Property or other assets that a borrower offers a lender to secure ...
Related Articles
  1. Credit & Loans

    Can You Live A Debt-Free Life?

    Avoiding loans goes against the norm but it can be possible - and enjoyable.
  2. Investing Basics

    APR and APY: Why Your Bank Hopes You Can't Tell The Difference

    Banks use these rates to entice borrowers and investors. Find out what you're really getting.
  3. Retirement

    Getting A Loan Without Your Parents

    Use the 5 "W"s to finance your dreams without banking on a second signature.
  4. Options & Futures

    Payday Loans Don't Pay

    Hold too tightly to this rescue line and you'll soon be drowning in debt.
  5. Options & Futures

    Car Title Loans: Good Option For Fast Cash?

    These loans provide fast cash, but they could leave you deeper in debt - and without a car.
  6. Savings

    Which Are The Best Credit Cards To Take To China?

    Credit cards are now much more widely accepted in China – and one issuer leads the pack, due to its deal with China UnionPay, the Chinese bankcard network.
  7. Credit & Loans

    Chase Sapphire Preferred Vs. AmEx Platinum

    Chase Sapphire Preferred has many rewards and is much cheaper. Is American Express Platinum worth its premium price? That depends.
  8. Credit & Loans

    How to Challenge & Win A Credit Card Dispute

    Found an error on your credit card statement? Five strategies to persuade the card issuer to fix it in your favor.
  9. Credit & Loans

    Review: Barclaycard Rewards MasterCard

    If you're looking for a rewards card and you have an average credit score, this one's worth investigating.
  10. Savings

    Avoid Credit Card Rewards Devaluation At All Cost!

    If you don't know how to redeem your rewards points, we'll show you the easiest way to avoid rewards devaluation this year.

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center