Title Loans May Give You Quick Money but Cost Thousands of Times More in Interest Charges
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Title Loans May Give You Quick Money but Cost Thousands of Times More in Interest Charges

If you need cash fast, a title loan can end up costing your car and thousands in fees

August 1, 2025

Feeling strapped for cash is common. To target people who need funds quickly, some lenders push short-term “title loans” that use your car as collateral. The pitch sounds simple, hand over the title for a small loan—but the reality can be devastating.

How Title Loans Work

The lender estimates your car’s value and offers a loan for a fraction of that amount, often around $1,000. You sign over the title and usually have only 30 days to repay. No credit check or income proof is required. Fail to pay on time and the lender can seize the vehicle.

Sky-High Interest Charges

Rates are quoted per month, not per year. A “25 percent” 30-day loan works out to roughly 300 percent APR. Three- to six-month installment plans average 260 percent APR. By comparison, many credit-card cash advances run below 30 percent APR.

The Debt Spiral

Most borrowers cannot repay in 30 days. Rolling the balance into a new loan piles fresh fees on top of unpaid interest. The average borrower renews eight times. The balance on a $2,000 loan can swell to nearly $11,921 before it is paid, or the car is lost.

Quick Cost Example

  • Initial loan: $2,000
  • End of 30 days at 25 percent: $2,500 due
  • Rolled over eight times: about $11,921 total repaid

Roughly one in five borrowers ultimately loses the vehicle.

Documented Abuses

Regulators have cited lenders for refusing cash payments, changing payment addresses without notice, or repossessing cars minutes after a deadline. The more valuable the car, the greater the incentive for abuse.

Better Alternatives

  • Borrow from family or friends
  • Seek emergency assistance programs or local charities
  • Ask a credit union about a small-dollar personal loan
  • Request a paycheck advance from your employer
  • Take temporary gig or part-time work
  • Consider a pawn loan for non-essential items
  • Use a credit-card cash advance if the rate is lower

Any of these options costs far less than a title loan. If you are already in a title-loan cycle, contact a nonprofit credit counselor or legal aid office for help negotiating a payoff plan before your car and your budget are both gone.