Disadvantages Of Title Loans

There are legal and financial implications to taking out a title loan, hidden fees that can leave the borrower in debt for the rest of their life. In this scrap from a personal essay, the author highlights these problems with blank checks and suggests more viable alternatives.

What is a Title Loan?

A Title Loan, or “Title Deed” loan, is a type of unsecured loan which you get from a lending institution like a bank or credit union. With a Title Loan, you borrow money against the equity in your car or property. When you repay the loan, you surrender the equity in your property as collateral for the debt. The Title Loan can have several disadvantages over other types of loans: -Title loans are not FDIC insured, so if something goes wrong with your vehicle or property and you cannot repay the loan, you could lose both the money you borrowed and your property (depending on the terms of your title loan contract). -Title loans are often more expensive than other types of loans. For example, a standard two-year car title loan may cost around 8% APR compared to around 3% for a payday loan. -Title loans are usually not renewable and have longer repayment terms than other types of loans. For example, a standard car title loan may have a term of up to five years while a payday loan may only have a term of 24 hours or less.

How much can a title loan cost me?

Title loans can be expensive, especially if you don’t have good credit. Here are three examples of how much a title loan can cost you. 1. If you take out a $3,000 title loan, your interest rate could be as high as 29%. That’s more than triple the nominal APR on traditional loans. 2. Title loans often come with variable interest rates that can change at any time without warning. That means you could end up paying significantly more for your title loan than you thought when you signed it up. 3. If you’re not able to pay back your title loan on time, penalties and fees can pile up quickly. For example, if you miss a payment by just a couple of days, the loan company might tack on a $30 charge to your bill. And if you make several late payments in a row, your loan company may even start legal proceedings to seize your property or sell it at auction.

Pros of a Title Loan

One of the most popular reasons to get a title loan is because it can be an advantage over PAPs or payday loans. While they both have their pros and cons, a title loan may be advantageous because: -There is no interest accrual while the loan is being repaid. This can help you avoid ending up in debt unintentionally; -You only need to bring your driver’s license or other identification to get approved for the loan, which makes it easier to access; -Unlike payday loans, there are no fees for getting a title loan and you can usually borrow up to $10,000.

Cons of a Title Loan

There are some definite disadvantages to taking out a title loan. Here are a few: -You may have to pay back the interest and fees much sooner than you anticipated. -You may end up with more debt than you originally intended. -If you lose your job, you may be unable to repay the loan in full.


There are some definite disadvantages to taking out a title loan, no matter the reason. Title loans can have high interest rates, and you may not be able to pay them back in a timely manner if you cannot afford the payments. They can also lead to more debt, which can be difficult to manage once it has built up. Are these enough reasons for you not to take out a title loan? Let us know in the comments below!