Is My Old Beater Worth a Car Title Loan?


More than one family has two cars, one being in decidedly better condition than the other. A car title loan may not seem like something that could be taken out on such a vehicle but, provided it's running, registered and in good enough condition to be sold, it may just qualify for one of these financial products. In fact, the old beater, because most newer cars are under financing agreements, may be a financial resource that's being underutilized, sitting in the garage gathering dust when it could be helping out the family in hard times.

A car title loan is a collateral type loan arrangement where the vehicle's title is offered as the security for the loan. The car title has a lien put against it by the lending company and the vehicle may be driven away after the loan is taken out. There is no need for any borrower to be bereft of their vehicle when taking out these financial products and, if there were such a requirement, it would be unlikely that these financial products would be as popular as they have become in recent years.

To write a car title loan, the lender must be presented with a vehicle that could be resold the day it is brought in for inspection. This means the engine must be running and in good trim, the body must not be severely damaged and that all the legally-required elements, such as blinkers, lights and so forth, must be in proper working order. The loan is written against the resale value of the vehicle and with sensitivity toward the borrower's income so that they don?t take out a loan so large that they have no chance of repaying it as arranged.

In most cases, car title loans are written for smaller amounts than the loans that banks and other lending institutions handle. They can even be for less than $1,000, far below the bottom limit of what a bank is usually willing to handle. While banks and other lenders usually require these base limits to ensure that it's profitable for them to write a loan, auto title lenders operate from a business model that emphasizes offering consumers a more convenient loan that can be written for smaller amounts and paid back quickly. The amount of these loans vary by state and region.

A car title loan is usually given a highest limit calculated as a percentage value of the expected resale price of the car should the borrower decide to default on the arrangement. In most cases, this total amount will be around 50% of the car's estimated resale value. Some states will allow borrowers to write higher amounts than this and others will limit the amount further. There will be a fee applied to the loan which covers the cost of the lender's financing of the loan. In most cases, interest accrues daily which allows the loan to be paid back early with no penalties.

The highest amount for which a car title loan can be written depends upon the value of the vehicle being offered as collateral but the old beater may be just enough to get needed money to cover basic costs of living when times are tight. In these instances, the loans function as something akin to a payday loan or a cash advance which allows difficult periods to be navigated without the additional stress of being completely broke and without any income due until the next pay period. The amount expected on that payday, of course, does influence the amount that can be borrowed.

Larger loans are usually calculated by banks and other lenders based on how much debt can be added to the consumer's monthly bills. A car title loan is designed to be paid back much more quickly, usually within the space of the pay period, which makes it much easier for the consumer to deal with as it doesn't become a long-term debt. Once the loan is paid off in full, the lien against the car's title is removed and the consumer's account is closed, and the consumer is, of course, free of the debt entirely.

If one's income is particularly low, it will influence the amount that can be taken out with a car title loan. Keep in mind that the lender's goal is to found a relationship with the consumer based on both parties being able to enjoy the benefits of short-term, easily understood lending arrangements. These loans are not subject to credit checking or to the other hassles that characterize most bank loans which makes them almost universally available to individuals who have a car which they can offer as collateral and a job or another source of steady, reliable income to their name.