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📅 Last Updated: October 6, 2023
✏️ Written By Caitlin Wood, BA

Your car is cash when you need it, especially if you have bad credit right now. Car title loans unlock the built-up equity in your car for situations when you don’t have any other means of credit and you need to pay expenses.

Getting a personal loan with a regular bank is hard these days because of high interest rates and a Canadian cash crunch for consumers. Being a newcomer to Canada with no credit history or having bad credit does not help either. Car title loans are short-term loans that let you use your car equity as collateral for the loan.

Car Title Loans Have These 5 Eligibility Requirements

Since your car is collateral for the loan, approval is usually easier than for an unsecured loan. These are the requirements to get the loan.

  1. Have full insurance protection for your car.
  2. Your vehicle must be no more than 8 years old.
  3. You have to own the car completely. There cannot be any outstanding debt attached to your vehicle.
  4. You must be 18 or older and be in possession of a valid driver’s license.
  5. You must have all the appropriate registration papers for your vehicle.
3 Steps To Apply To A Car Title Loan

How To Get A Car Title Loan

Gather Your Documents
Before applying, gather all the documents necessary to apply for an auto title loan. Many applicants get rejected or have their application process delayed due to incomplete or missing documents. In general, you’ll need proof of identification, proof of income, proof of employment, and proof of car title.
Find A Lender
Auto title loans can only be found with alternative lenders, banks and credit unions do not offer auto title loans. To help you find an auto title lender with the best offers, you can use a loan comparison website like Loans Canada to get multiple quotes from different lenders using a single application.
Complete The Application
After you review your offers, you can complete the application process with the lender of your choosing. After that, you’ll simply need to wait for approval, after which you should receive your within a few hours to a couple of days.

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What Documents Do You Need For Car Title Loans?

Car equity loans are pretty straightforward and you can apply online. You simply fill out a short loan application. Although there will be some differences depending on which lender you chose to work with, most will require:

  • Personal Identification – This includes documents to verify your name, address, and phone number. Lenders usually accept a driver’s license, passports or some other government-issued photo ID.
  • Financial Details – Some car title lenders may require proof of income and employment. This can include bank statements or pay stubs.
  • Vehicle Title Documents – One of the most important documents you will need to bring is your car title document. This is necessary to prove that you are the legal owner of the car. 
  • Car Insurance – Lenders require that you have insurance on your car, so you may need to purchase it and provide proof. 
  • Vehicle Details – You’ll need to provide information regarding your car’s make, model, year of the car and mileage.
  • Vehicle Inspection – Your lender may also require a car appraisal to verify its condition and value. 

If you think that you need to know more about car loans and auto financing, we can help. Just click the button below to get the information you need.

How Much Can I Borrow Against My Car Title

Typically lenders will lend up to 50% of your car’s value. However, the loan amount can be as little as $100 in some places and run as high as 75% of the Kelley Blue Book (KBB) resale value of the vehicle. 

Once you come to an agreement, the lender puts a lien on vehicle. The lien lifts when you pay the loan completely. Again, there cannot be any existing liens on the car when you apply for a car title loan.  

What Is A Lien?

The lien is what makes a secured car loan, secured. It is a type of security interest that is placed on the car. It’s meant to help ensure that the borrower will, in fact, make their loan payments on time.

If the borrower stops making payments on their loan or cannot afford to pay the loan off in full, the lender can legally repossess the car and sell it to recoup the cost of the loan.

You can also voluntarily surrender your car.

Do I Still Own My Car If I Take Out A Car Title Loan?

You still own your car and you can use your car like you already do. The lien is in place to give the lender the right to legally take possession of the car when you still owe the lender money but stop paying the debt for any reason.

How Long Until You Get The Money From Car Title Loans?

The good news is that you get the money fast – usually within hours or even a few days of approval. Of course, it depends how you apply. Online lenders are better able to evaluate and approve your loan.

What Are The Benefits Of Car Title Loans?

There are several benefits using cash value you already have but need to access – that is what equity is. Of course, nothing is perfect. These are the main pros and cons of a car title loan.

ProsCons
Speed – apply online and get approved within hours or daysThe car secures the loan – if you stop making payments, the lender can seize it.
Short-term – 3 months to 3 yearsHigher interest rates than other secured loans
Online application or in-personExtra fees add to the total cost of the loan
Good for bad credit scores
No hard credit check
No down payment required
Usually a lower rate than a payday loan
You still own and use your car

Learn more about your rights and responsibilities as a borrower.

What Is The Difference Between A Car Title Loan and A Car Equity Loan?

There is no difference between car title loans and car equity loans.They are secured loans. The debt-free cash value in the car is collateral. Since you paid off your car and own it entirely, you have a lot of equity in it.

Just like a home equity loan, a car title loan is a car equity loan. You use the value of your car against the loan. However, if you default on any payments, your lender has the right to seize your car to recoup the money. 

Can I Get A Car Equity Loan If I Have Bad Credit?

If you have bad credit, an auto title loan is probably the easiest way to get a loan. Since you secure the loan with your vehicle, your application is less risky to the lending officer who is reviewing your file.

Tips On What To Watch Out For With Car Title Loans

While car title loans have numerous disadvantages, they can be overcome by doing the following: 

  • Read the Contract: Make sure you read the contract thoroughly and understand the consequences.
  • Make Sure You Understand The Cost Of All Fees: Many car title loan lenders also charge numerous fees that can quickly add to the cost of the loan. Some common ones include administrative fees, loan origination fees, vehicle inspection fees and more. 
  • Choose A Shorter Term – Try to pay the loan off in the shortest amount of time, and avoid using this quick and easy financing option as a short-term solution to long-term financial problems. 
  • Do Your Due Diligence – If you are in a cash emergency and you intend to use this type of financing, a car title loan can be a good source of funding. Just make sure to shop around, read the fine print, and pay it back within the allotted time and you should be okay.

Where Can I Find Car Title Loans Near Me?

Car title loans are found both online and at physical locations near you. However, it is easier to find auto title lenders online in your area than in a physical location. 

BHM
Loan Amount$1,000 – $15,000
Terms12 – 60 months
Funding TimeLess than 24 hours
Eligibility – Car must be less than 8 years old
– Car must be paid off
– Car must be insured
– Clear title
Documents Required– 2 valid photo IDs
– Proof of income
– Proof of address
– Photos of vehicle and vehicle’s odometer
– Proof of insurance
– Proof of ownership of the vehicle
– Void cheque
– 5 References
Geographical AvailabilityAcross Canada
Apply Today

Car Title Loans Are Fast Access To A Short-Term Loan

Car title loans are short-term easy to pay off loans and therefore are a great option when your income is tight but life is still happening. The convenience of accessing your car’s equity allows you to deal with whatever emergency or financial needs you might have right away.

If you’re interested in more information or want to start the process, Loans Canada can help.

Car Title Loan FAQs

Are Car Title Loans Different From Personal Loans? 

Yes, they are different things. Car title loans (aka: auto title loans, car equity loans) are a form of credit Canadians can use to get a lump sum of cash. You use your car’s equity to secure the loan. You repay it in installments just like a personal loan. Of course, you repay what you borrowed plus interest. Personal loans are either secured or unsecured and require a hard credit check. A personal loan amount can be much higher than the value of 50% of the value of any car.

Can I get a loan against my car title if I’m still paying off my car loan?

Unfortunately, if you don’t own your vehicle outright you likely won’t be able to get approved for an auto title loan. The main reason for this is that the lender who holds your car loan will be first in line to recover their money if you default on your loan. The lender who holds your title loan will be second and may never get their money back. Most lenders won’t want to take this risk.

What credit score do I need to get approved for a car equity/car title loan?

Ultimately this depends on the lender you choose. But, the good news is that title loans often come with less strict requirements (including credit score limits) because the loan is secured. This means that if your credit score isn’t quite as high as you would like, you can still get approved.

How much money can I borrow with an auto title loan?

This depends on the value of your vehicle, how old it is, and what condition it’s in. In order to get approved for a title loan, you need to own a vehicle that has some value. If your vehicle meets these requirements, you can typically gain access to anywhere between 25% to 50% of its value. It can go as high as 75% of the built-up equity. Remember the value of your vehicle is not what you originally paid for it.

Will getting an auto title loan help to improve my credit?

If your vehicle title loan provider reports payments to one or both Canadian credit bureaus, then it can help you work towards improving your credit. But, if they do not report payments, then the loan will have no effect on your credit. If credit improvement is important to you, always make sure you ask your lender if they report payments before signing a contract.

What is the difference between a car loan and an car title loan?

A car loan is used to purchase a new or used vehicle, in this case, the vehicle acts as collateral for the loan. Once you’ve completely paid off your car loan, you can then use your vehicle to secure a title loan. The money from a title loan can be used to purchase whatever you need.
Caitlin Wood Priyanka Correia Lisa Rennie Bryan Daly Cris Ravazzano Margaret Johnson Kale Havervold Liz Enriquez Sean Cooper Veronica Ott Corrina Murdoch Chrissy Kapralos

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