Finding loans for bad credit can be challenging. Most lenders want to see that you pay your bills on time and haven’t had financial issues in the past. They will typically decline your application if you don’t meet their minimum credit score requirements.
If this sounds like you, hope is not lost. Bad credit title loans offer financing options for people with poor credit who can otherwise prove they can afford title loan payments. While title lenders do a credit check, it’s a minor factor when determining eligibility.
What Are Title Loans for Bad Credit?
Title loans for bad credit are loans against your vehicle’s equity. For example, if your car is worth $10,000 and you don’t have any outstanding loans against it, you have $10,000 in equity. Title lenders may lend you money against that value, sometimes as much as 70% of the vehicle’s value, regardless of your credit score.
When you borrow a title loan, the lender puts a lien on your vehicle’s title until you repay the loan in full. Title loans can have high interest rates, sometimes as high as 175%, and may have excessive fees. However, you get to keep the car and drive it even while you owe money on the loan.
It’s good to know: If you don’t make your payments on time, the lender can begin repossession of your vehicle. This means they can take and sell your car, using the proceeds to recoup the lost money.
Why Would You Get a Car Title Loan With Bad Credit?
It’s important to use auto title loans only when you’ve exhausted all other options to handle your financial situation. Consider it an emergency loan only. If you have a bad credit score and can’t borrow money from friends or family or don’t qualify for any other loans from a local bank, then consider it in the following situations:
- Your car broke down, and you don’t have the money to repair it
- You or a family member had a serious medical emergency
- You can’t make the rent or mortgage payment and face eviction
Don’t apply for a bad credit title loan just because you know your car has equity and you can use it. The interest rates and fees are too high to use the loan for anything but an emergency.
How to Qualify For Title Loans With Bad Credit
Fortunately, qualifying for title loans with bad credit is much easier than any other loan. Most personal loans, for example, require great credit scores and a steady job. Most title loan lenders won’t require either of these factors to qualify you for a loan. Instead, you must prove the following.
Prove You Can Afford the Loan
The most important factor is proving you can afford the loan payments. A title loan lender must ensure that you have a steady income, but it doesn’t have to be from a job. Most lenders will accept many types of income, including:
- Passive income
- Social Security
- Disability income
- Tax returns
- Cash settlements
- Workmen’s comp
- Part-time jobs
The key is to prove that you make enough money to cover your existing bills and the new loan if they approve you.
Show Ownership of a Vehicle With a Lien-Free Title
Another important factor is showing ownership of a vehicle with a lien-free title. Title loan lenders use this as collateral for the loan, so it’s important that you own the vehicle and do not have any outstanding loans on it.
Fortunately, you don’t have to get a physical inspection with online title loans, but you must provide adequate pictures of the vehicle’s interior, exterior, and odometer readings for the title lender to determine its value.
Meet Age, Residency, and Insurance Requirements
Most auto title lenders and states require you to be at least 18 years old, live where you apply for the loan, and meet the minimum auto insurance requirements for your area.
What Documents Do You Need For Car Title Loans With Bad Credit?
- Government-issued ID: You must prove your identity with a valid driver’s license, state ID, or passport.
- Proof of residence: You may need to prove you reside in the state you’re applying for a title loan to get approved.
- A valid car title: The car title must have your name and be lien-free, which means you don’t have any loans.
- Proof of income: Provide paystubs, bank statements, award letters, or any other official proof of your valid income.
- Photos of the vehicle: Lenders require photos of the interior, exterior, and odometer to determine the car’s value.
How Fast Can I Get Funds?
Here’s the best news. When applying for an auto title loan, you may be eligible for funds the same day. It depends if you complete the application process and get final approval before the lender’s cutoff time.
If you miss the same-day cutoff, you can usually get funds by the next business day. For example, if you apply and get approved late Tuesday afternoon, you could have funds by Wednesday.
Considerations Before Borrowing Online Title Loans for Bad Credit
When considering auto title loans, it’s important to consider these factors:
- Budget: Take the time to check your budget to confirm you can afford the loan payments. You put your car at risk of repossession if you don’t make your payments on time.
- Loan cost: Read the fine print so that you understand the cost of borrowing emergency funds fast. To ensure it makes sense, consider the interest rates, fees, and overall loan cost.
- Credit scores: Title lenders don’t report to the credit bureaus, but title loans can hurt your credit if you don’t make your payments, as collection agencies report to the credit bureaus.
- No selling the car: When you have an outstanding secured loan on the car, you cannot sell it until you pay off the title loan in full.
- Alternatives: A title loan should be your last option after considering other bad credit loans, such as payday loans, personal loans, or borrowing from friends and family.
FAQ
Can I Get a Loan With Bad Credit if I Have Collateral?
A title loan can be an alternative to a personal loan if you have bad credit. The key is to have valid collateral, such as a car, motorcycle, or RV.
Is a Title Loan a Bad Way to Borrow Money?
Title loans are a costly way to borrow money because they have high interest rates and fees. Plus, you put your car at risk of repossession if you don’t make your payments. Try exhausting all other options first to get fast cash, using title loans as a last resort.
How Can I Improve My Credit Score?
The easiest way to improve your credit score is to make timely loan payments. The credit bureaus use your payment history as the largest factor of your credit score. Next is your credit utilization or how much of your credit lines you have outstanding. It’s best to keep your credit card balances low to increase your credit score.
Can I Get an Online Title Loan Without a Title?
You need a valid title to get a bad credit title loan. If you misplaced the title, a title loan lender may be able to help you order a replacement.
Are There Any Restrictions on How to Use Funds From a Title Loan?
Title loan lenders don’t restrict how you use title loan proceeds. However, you should only use them for extreme emergencies because of the higher rates and fees.
Final Thoughts
Bad credit title loans offer an option to satisfy a financial emergency. They offer access to fast cash for people with poor credit who may not be eligible for other loan options. You may get the funds you need even with a low credit score if you have a free and clear title and proof of valid income.
Complete a free, no-obligation loan application online today to determine your eligibility and what interest rate and fees you’d pay to borrow the necessary funds.
