Title loans can be a useful tool in situations in which you need to get some extra cash quickly. The application process is simple, funding happens quickly once you’re approved and you can usually set up repayment terms that are easy to manage. Given all of those advantages, it stands to reason to wonder, “Can I get a title loan with bad credit?”
What is a Title Loan?
These short-term loans are secured by the title to your car, truck or even a motorcycle. Serving as collateral, the vehicle makes qualifying for a title loan much easier than getting approved for a personal loan from a bank or a credit union. In fact, the approval process is often faster too.
Generally, you must own the vehicle outright to get a loan against its title, though there are some instances in which you can get a loan on the equity you have in a vehicle if you’re still making payments on it.
In that case, equity is the difference between the fair market value of the auto (what it’s currently worth) and the amount needed to payoff the loan. Subtracting the amount you owe from the value of the car reveals the amount of equity you have in the vehicle.
Upon approving and funding the loan, the lender holds on to the title to the car until the loan is repaid. Meanwhile, you can keep driving the car as you pay off the loan.
Title Loans and Your Credit History
In most cases, your credit history is of little consequence when applying for a title loan. The one exception is in cases in which a borrower has recently been granted bankruptcy protection. That aside, though, many title loan lenders do not run credit checks. Instead, they rely on proof of income to make sure you’re capable of repaying the loan. In other words, while bad credit might not be an issue, having a job that pays enough for you to repay the loan does.
What’s more, applying for a title loan usually does not affect your credit score the same way applying for a personal loan at a bank or a credit union does. According to the credit-reporting agency Experian, submitting one of those applications can actually lower your credit score by five points. This is because one of the factors that goes into determining your credit score is whether or not you’ve applied for a loan recently.
Applying for a Title Loan
Before submitting an application, you’ll need to have the title slip or registration card for the car and government-issued proof of your identity.
You’ll need to take pictures of the car from all four angles and provide photos of the interior too, if applying for an online title loan. Lenders will want to see a utility bill in your name or some other documentation to prove the address you provide is where you live. They’ll want you to provide proof of your income to show you’re capable of repaying the loan too.
With those documents in hand, you’re ready to fill out the application online. If you’d rather do it in person, you can take the car to the loan office, rather than shooting the photos yourself. The main thing is the lender wants to be able to verify the overall condition of the car.
Title Loan Approval and Funding
In most cases, you’ll be approved for the loan and have the cash within 24 hours or less, once the application is submitted. Loan proceeds can be direct deposited into your bank account, mailed as a check, or you can pick up a check at the loan office.
So yes, you can get a title loan with bad credit in many instances. Plus, the process is quick, simple and you can set up terms that make repayment easy.