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What is a Car Title Loan and How Does it Work?

By Jenny Williee | February 17 2020

What is a Car Title Loan and How Does it Work?The speed and ease of getting a loan using car title as collateral have gradually become popular, making car title loans the most sort after funding option in times of emergency needs. A car title loan can be the means of escape for individuals in need of cash and who need this cash fast to take care of urgent needs.

Not everybody, however, has gotten access to information about what a title loan is or how it works. Even if you must have gotten the basic facts about the subject, there are still some more things you should know about car title loans. Let’s learn more about What is a title loan and how does it work!

Rather than drown in a financial embarrassment or sink further in debts, getting a car title loan in California is a better decision in such trying times. It is, however, important that you are well equipped with necessary details about car title loans, as well as all you need to qualify and apply for one.

Car Title Loans California

If you reside anywhere within the state of California and you are in a situation where you need a quick sum of money for a short period, a fast car title loan with Car Title Loans California is a convenient solution.

We understand the needs of our customers and we know that sustaining the good life while keeping a good credit score can be a struggle. So we provide our clients with top-quality title loan programs to support their financial needs. Your car and the clear car title is your ticket to getting a car title cash advance. No much emphasis on your current credit score or credit history whatsoever.

How Do Car Title Loans Work in California?

Though your credit will be checked, it is not a major factor for approval. Car title loans California has been helping people for over 20 years and we are here to help you get the fast emergency money that you need. Applying for a car title loan with us, you will get the most money on your car title, at the best interest rate and we charge you no prepayment penalties whatsoever.

As you read through, you will find out a whole lot of things you need to know about title loans and how they work. This article also answers the most common questions people ask about the subject matter.

What Are Car Title Loans and How Does a Title Loan Work?

What Are Car Title Loans and How Does a Title Loan Work?A car title loan which is also known as a pink-slip loan, auto title loan, title pledge, auto equity loan, title pawn or car title cash advance is a short-term, high-interest-rate loan that uses the clear title or equity on your vehicle as collateral. It is a very expensive form of credit, and the car title as collateral makes it a secured loan. The lender issuing the auto title loan collects the car owner’s title in exchange for the cash.

Car title loans have become more popular in recent times because of how easy it is to get them. They are also popular with people who have poor credit but own the titles to their cars. It is usually a short-term loan.

When you compare this loan acquisition process to that of other traditional lenders like banks and credit unions, you see that it is mild and involves fewer rigors. On like secured loans from conventional banks and credit organizations, you do not give up your car. Rather, your car remains in your possession and you continue to use your car as long as you stick to the terms of the agreement.

Once you receive the loan amount, the title lender places a lien on your car or vehicle, and then you sign the terms of agreement indicating the repayment period plus the interest rate. Car title loans offer great deals and are much more flexible and get you thousands of dollars of about $2,500 to $50,000.

Car Title Loan Interest Rates

how does a title loan workAuto title loans short term loans, usually for 24 to 48 months with a high-interest rate and a triple-digit annual percentage rate (APR). This is, of course, a much higher interest rate than most forms of credit. Car title loans were designed for people with poor credit, hence, the interest rates are usually much higher than the rates on standard bank or credit union loans or credit cards cash advance.

A typical car title loan could be up to a 10% monthly interest rate. On the other hand, the annual percentage rate for that loan would be 120%. The cash advance you qualify to collect depends on the value of your car.

After providing information about yourself and your car during the application, a title loan representative will then appraise your car, evaluating the worth of the car to determine the resale value. At the end of the evaluation. the result of the appraisal will determine the maximum amount of money you can borrow from the lender. Car title loans often are for an amount of cash that is about 25% to 85% of the value of the car.

On average, depending on your state of residence and car’s resale value, you can get between $2,500 to $50,000. Whatever brand and model of the car you are using, as long as you are the owner of the car or vehicle or have enough equity in the car, you are assured that you can get a car title cash advance for yourself.

Title Loans State Legislation

how do car title loans work in CaliforniaWhen it comes to laws and restrictions governing the car title loan industries, it varies from one state to another. Not all states allow title lending.  As of August 2012, about 22 states in the US did not permit auto title lending. Only 8 states allowed it, but at lower rates. 16 states allowed auto title lending with three-digit APR, and 4 states permitted auto title lending through a loophole in the law.

Title loans are allowed in California, with a whole lot of restrictions too. According to a report by the New York Times, a lot of customers take out auto title loans yearly, but very few states record the statistics. And in 2011, the California Finance Lenders Law established legislation that permits licensed companies and organizations to give short-term loans that are secured by titles or pink slips of automobiles.

The laws, which differ from state to state, cover specific areas of title loans like; interest rates, administrative fees, and repossession. These laws according to the Department of Business Oversight in California put title pawn lenders in check at all times with legal guidelines about the dos and don’ts of car title loans.

Find out more about car title loans via

Loan Terms & Agreements

Before you sign any title loan document? The car title loan lender must give you the loan terms of the agreement. And they must ensure that you understand every detail in the agreement before signing. The federal Truth in Lending Act treats car title loans like other funding options. That’s where lenders must disclose the cost of the loan to borrowers.

If at all there are any fees or charges (like processing fees, document fees, late fees, loan origination fees, title charges, and lien fees)? It must be clearly stated. The annual percentage rate which depends on the amount you borrow, the interest rate and credit costs you’re being charged and the length of your loan must also be indicated to give borrowers a clear picture of what they are signing up for.

How Car Title Loans Work

How Car Title Loans WorkSo, What is a title loan and how does it work? Once you own a car or at least have enough equity in the car or vehicle? You can get an auto title loan. It is easy, quick and free to get a car title loan. Your car or vehicle can be your lifesaver at the time of critical financial needs or when you are running out of cash.

Your car title or pink slip is what you offer to the car title loan company when you take a car title loan. This title document is what indicates your ownership of the car or vehicle, and is what you provide the lender with when you acquire an auto title loan.

The way a car title loan works are; you first approach an auto title loan company with your car and title, then the title loan lender inspects your car to ensure it is in good shape. This inspection process is what helps your lender gather specific data about your car to come up with a loan amount that suits the value of your car. Then the lender will place a lien on it, and hands over the loan cash to you.

After you approach an auto title loan company for a loan and your car has been appraised? A title loan officer will guide you through the rest of the approval process. You can get the financial help you need on the same day that you apply. Typically within minutes or in 1 business day!

Preparing Documents for Application

title loans how they workYou will be required to present some documents like proof of income, proof of residence, photos of your car and about five (5) references. Your lender may also need to contact your insurance company (though not a strong determinant). 

Since your car title is the collateral for the loan, an inspection is a way of ensuring that you receive the maximum amount based on your car’s worth. A car or vehicle inspection may reveal a higher value, hence, qualifying you for more cash.

The auto title loan company assesses your car or vehicle and lets you borrow a certain percentage of its value (which could be up to 60%). This percentage is reached by a car auto title loan calculator. Now you know a bit about what is a title loan and how does it work.

You can pay off your loan anytime. The loan repayment period is usually not lengthy (about 30 days or more). And contrary to the general belief that when you take an auto title loan, you stand to give up your car or vehicle, you still keep your car when you take a car title loan. You get your title back when you pay the loan in full as far as you don’t default the agreed terms.

With Car Title Loans California, it works in three simple steps;

  • Approach us to apply
  • Provide us with the needed documents
  • What is a title loan and how does it work?
  • Get approved and collect your cash

Although auto title loans are short-term loans, you can agree with the repayment period with your lender. While some lenders may offer you a more extended loan payment plan, others may not. With us, you can completely pay up the loan in time by making larger payments each month without being penalized for prepayment.

Payment Plan and Payment Options

car title loans how do they workYour payment plan depends on the lender’s policy and the outcome of your negotiation with your lender. While some lenders may allow you to pay more each month to complete payments before time, other lenders may not. Some lenders may allow you to make payments for a longer period, others may not.

It is up to you to decide which payment option is best suitable for you. Either you pay directly to the title loan office in person, or through an online system by direct fund transfer. You could also choose to subscribe to an automated payment system.

Different title loan firms offer different payment options to their customers. We work to reach a payment plan and payment option for your convenience so that your title loan doesn’t put you under undue pressure. This is why we stand out as the best title loan company in California.


how do car title loans work in californiaRoll-Overs: You will be allowed to roll over the loan if you cannot pay it off within the stipulated time. But remember! Each time you roll over? You do so at a higher interest rate! And, you end up paying more than you were supposed to.

For example? You take a loan for say $1,000 which you were to pay back $1,250 at the end of the loan period. But, you only managed to pay $250. Then the remaining amount will be rolled over to a new loan.

This will attract a much higher interest rate to cover the high risks undertaken by lenders. Leaving you in the debt cycle, and even at risk of losing your car through repossession. Car Title Loans California will work with you all the way. We permit rollovers, and we also ensure you are well assisted and supported to meet up with your payments. We even offer car title loan buyouts!


It is possible to default on an auto title loan. A situation where a borrower fails to follow through on the terms agreed with the lender when taking out the loan as stated in the borrower’s contract is called a default.

When a default occurs, the auto title loan company may attempt to contact the borrower to discuss more efficient ways to remedy the situation. But this is not the case with all lenders. Some lenders may offer to help you. And, others will remain unavailable at this point. Thus, leaving you boxed up in your predicament. And eventually, repossess your car.


When a borrower defaults, what follows next is repossession. This is the situation where defaulting customers lose their cars to the lender. In most cases, the lender may decide to contact the borrower to come up with a better way to repay the loan, or immediately proceed with the repossession process, which will impair your means of transportation.

There are also laws instituted by states to govern repossession. But usually, after repossession, the lender is legally permitted to auction your car to recover the loan sum. Any excess cash after the resale will be returned to you. Since the lender is responsible for all the repossession expenses over $500, not all lenders will choose to impound your car right away. We will still offer to assist you until you successfully repay the loan in full. Learn about loans from

Apply for A Car Title Loan

You apply for a car title loan over the phone, online, or in person. Contact Car Title Loans California at 1-844-242-7467 or access our 100% online title loan application form from our website. We have our title loan offices scattered within California! All of which you can walk into and begin your application process.

After your loan application? We will reach a loan amount that your car qualifies you to access. We do so by using the Kelly Blue Book as a tool. After that, we will proceed with your credit verification using Experian. We will also have to verify your earnings per month. Even if you are unemployed, you can still apply. Just have a car with the title in your name! And, a source of income every month! You’re then good to go! Now you know what is a title loan and how does it work!