If you’re in a crunch for money or a way to sell your car fast, you might have heard about the ability to pawn your car title, but what is title pawning?
Car title pawns allow vehicle owners to use their car’s title as collateral for a short-term loan. With a car title pawn, you hand over the title to the lender but keep possession of your vehicle while repaying the high-interest loan.
Understanding Car Title Pawning
|A way to secure a short-term loan using your car’s title as collateral.
|You keep the car but give the lender the title as security.
|The loan plus interest is typically repaid within 30 days to a few months.
|Failure to repay may result in the lender repossessing and selling your car.
Though car title pawns provide quick access to cash, they come with serious financial risks like astronomical interest rates and potential repossession of your vehicle.
To help you decide is a title loan or title pawning is for you, I created this article that covers how car title pawns work, their pros and cons, fees and rates, alternatives, and tips for borrowers.
Table of Contents
How Do Car Title Pawns Work?
With a car title pawn, you bring your free-and-clear vehicle title to a title lender, who assesses your car’s value and lends you a percentage of that amount in cash.
- You typically hand over the physical title as collateral while keeping possession of your vehicle.
- The lender places a lien on the title during the loan term.
- Title pawns must be repaid within a short timeframe, often 30 days.
If you manage to repay the pawned amount plus interest owed by the due date, you get back your title, lien-free, and avoid losing your vehicle. But if you default, the lender can repossess your car to recoup their money.
This quick process makes car title pawns appealing for fast cash. But the extreme fees and default risks also make it an extremely expensive way to borrow.
How Much Can You Get For Pawning Your Car?
Loan amounts are usually 25-50% of your car’s value based on factors like year, make, model etc. Luxury vehicles can qualify for up to 50%.
Loan Amounts When Pawning Your Car
|Factors Influencing Loan Amount
|Approximate Percentage of Car Value
|Make, model, age, condition, mileage, and market demand
|State regulations (maximum loan amounts may apply)
|Varies by state
|Based on lender’s valuation
|Example: For a car worth $10,000
|You could receive a $2,500 – $5,000 loan
- What Disqualifies an Applicant For a Title Loan
- Can I file For Bankruptcy And Keep My Car
- The Complete Guide to Car Repossession
- Give Back Car – Avoid Repossession
- How Late Can You Be On a Title Loan Before They Take Your Car?
What Do You Need for a Car Title Pawn?
You’ll typically need to show the title lender:
- Your vehicle
- The original title listing you as the owner
- Government photo ID
- Proof of income
- Proof of insurance
- Spare keys for your vehicle
The lender will use these to verify ownership and estimate your car’s value to determine the pawn loan amount.
Step-by-Step Process to Getting a Car Title Pawn
Follow these basic steps when pawning your car title:
- Find a title pawn lender – Research lenders and apply online or in person
- Submit documents – Provide ID, title, proof of income etc
- Get your car appraised – The lender assesses your car’s condition and value
- Sign pawn agreement – Terms include loan amount, fees, interest, repayment deadline
- Hand over your title – The lender keeps it until you repay the pawn
- Receive pawned cash – Typically 25-50% of car value
- Repay the pawn – With interest by the specific due date
- Get your title back – It’s returned to you lien-free if repaid on-time
Payments are usually due in full as a balloon payment within 30 days. Failure to repay the pawn risks the lender repossessing and selling your car.
Interest Rates and Costs of Title Pawns
- Car title pawns allow fast cash, but lenders charge exceptionally high interest rates, with average APRs of 300% .
- At a 300% APR, you would pay $250 interest PER MONTH on a $1,000 title pawn loan.
- Additional junk fees like origination, storage and late fees further raise costs. Total borrowing costs typically range from 200-300% APR when all interest and fees are included .
So despite receiving what seems like easy money upfront, you end up paying exponentially higher costs overall through these loans. This makes it very risky and difficult to repay.
Title Pawns vs. Title Loans
Though often confused, some key differences exist between car title pawns and title loans:
|Temporarily surrender possession of your car to lender
|Retain possession of your car
|30-90 day terms typically
|6-12 month flexible repayment term
|Higher interest & fees
|Lower rates than pawns
|Maximum loan amount limits
|Can borrow higher percentages of car’s value
|Rely more on car’s value over income
|May check credit or income
So in choosing, assess your need for your car during repayment, desired loan duration, rates, and if credit checks make sense for your situation.
Risks and Downsides of Defaulting on a Car Title Pawn
Pros and Cons of Pawning Your Car Title
|Quick access to emergency cash.
|High interest rates (approx. 300% APR).
|No need for credit checks.
|Short repayment terms can lead to financial strain.
|Continue using your car while repaying the loan.
|Risk of repossession and loss of the vehicle.
|Potential for larger loan amounts vs. unsecured loans.
|Additional fees can increase the cost of the loan.
|Loan amounts based on car value.
|The debt cycle risk due to potential rollover loans.
If you miss payments on a 30-day car title pawn, consequences escalate quickly:
- The lender can automatically take possession of your car – Without needing to take legal action first.
- Your vehicle gets repossessed – A repo-man will forcibly tow your car away.
- You lose a crucial asset and transportation.
- Your credit score gets damaged.
- You still owe pawn fees – Repossession does not clear the outstanding debt.
Clearly, the risks of defaulting on short-term title pawns are substantial. Avoid pawns if unsure of repaying within 30 days, or pursue longer-term title loan products instead.
Alternatives to Risky Car Title Pawns
Before pawning your car title, exhaust other, less predatory borrowing options:
- Borrow from family and friends – If possible, borrowing from people you know often charges 0% interest. But make sure to repay loans from loved ones on time.
- Credit cards or personal loans – While still carrying high rates for those with poor credit, traditional loans/cards offer more reasonable rates than 300% title pawn APRs.
- Payday loans – Payday loans allow those with bad credit to get small-dollar loans, often repaid on the next paycheck. Still very high rates, but more oversight over defaults.
- Auto refinancing – Refinancing your current car loan to a lower rate creates manageable payments compared to title lending.
Pawning your car title is an absolute last resort if every other avenue possible has been exhausted first. But in dire scenarios where traditional credit simply isn’t an option, title pawns present an emergency lifeline to get the cash needed. Even then, very careful consideration is required.
Key Takeaways on Car Title Pawns
- Car title pawns allow vehicle owners to borrow against their car’s value at extremely high 300%+ interest rates.
- Defaulting risks losing your vehicle, damaged credit, and continued fee accumulation.
- Exhaust all other channels possible before considering a title pawn’s downsides.
- If tapping a car’s equity is absolutely necessary, compare title pawn vs. title loan options.
- Thoroughly understand all aggressive fees and pointer interest penalties prior to making any borrowing decision against your vehicle.
The Bottom Line On Title Pawning and Title Loans
While car title pawns supply rapid access to funds by using your car as collateral, astronomical 300% APR interest paired with short 30-day repayment windows makes them a very expensive, high-risk form of either selling your car or getting access to cash to pay for emergency bills.
Exhausting all other channels possible before tapping into your vehicle’s equity should be the rule of thumb, as default consequences escalate quickly.
If you must leverage your car for cash as an absolute last resort, carefully analyzing both title pawn and title loan differences in relation to your state’s regulations remains crucial for making the most informed financial decision.
Frequently Asked Questions
Can I get a car title pawn completely online?
While you can begin the application process online, lenders still require in-person vehicle inspection and appraisals before approving and funding title pawns.
What states allow car title pawns?
Around 17 states fully permit title pawns, including Alabama, Georgia, Mississippi, Nevada etc. Another 15 states have restrictions like interest rate caps and loan limits. 29 states prohibit or heavily restrict title lending.
How long do I have to repay a title pawn?
Title pawns typically carry short repayment terms of 30 days or less. Failure to repay the entire pawned amount plus interest owed in that timeframe risks default and repossession.