Title loans
What is a title loan
If you have a low credit score, it may be difficult for you to borrow money. A title loan is an option for borrowing money if you have a low credit score and own a car.
You use your car as a guarantee that you’ll pay the money back. You may also use other types of vehicles that you register in your province or territory. You keep and may continue to use your car when you get a title loan. If you don’t make your payments, you could lose your car.
Title loans are typically short-term, ranging between 3 months and 3 years. They usually have high interest rates and fees. This makes it an expensive way to borrow money.
Title loans are also known as:
- car title loans
- auto title loans
- vehicle title loans
- vehicle collateral loans
Banks and credit unions don’t offer title loans. They’re available from alternative lenders in stores and online.
Title loan rules and regulations
The federal government doesn’t oversee title loans.
Provinces and territories have different rules and regulations for title loan lenders. For example, some title loan lenders may need to have a license or be registered to operate.
You may find information on rules and regulations with your provincial or territorial Consumer Affairs office.
Find your provincial or territorial Consumer Affairs office.
Things to expect when you get a title loan
Title loans vary between lenders. Some lenders won’t give you a title loan if you owe money on your car.
Some lenders use the value of your car to determine:
- the interest rate you’ll pay
- your repayment terms
- the amount of money you can borrow
Read the details of your contract carefully before you sign. Ask your lender for a copy of the agreement. Ask questions about anything you don’t understand.
Find out what to consider before borrowing money.
What you’re entitled to know before taking out a title loan
When you get a title loan, you have the right to receive specific information in your contract documents.
This information may include total cost, interest rate, additional fees and more.
Information may differ depending on your province or territory.
Check with your province or territory to learn more about the information you should receive,
Liens
A lien is a lender’s claim for repayment that is registered against a car.
Most lenders will check to make sure there isn’t already a lien on your car. If there is already a lien, the lender may still offer you a title loan. That would be the case if your car can be sold for more than the amount of the existing lien.
The lien will stay registered on the car until the title loan is paid off.
Learn more about risks associated with car liens.
GPS and car immobilizer devices
Lenders may install a Global Positioning System (GPS) device and a car immobilizer when you get a title loan. They could also keep a copy of your keys.
A GPS device allows a lender to track the location of your car. A car immobilizer allows the lender to shut off your car’s starter remotely. It’s also known as a vehicle or ignition immobilizer or starter interrupter.
Depending on the province or territory you live in, these devices may not be allowed.
Make sure you understand how the lender will use these devices before taking a title loan.
Interest rates
Interest rates on title loans can be as high as 60% per year. This depends on the terms of your contract.
By law, lenders cannot charge more than 60% interest annually. That includes fees and interest you’ll pay to get the loan.
Fees
Fees vary between title loan lenders. Before you sign a contract, make sure you understand the fees.
Types of fees may include:
- vehicle evaluation fee to determine the value of your car
- title search fee to see if there are any liens on your car
- search fee to see if your car has been in any accidents
- administration fee to set up and maintain your account
- roll-over fee to extend the term of your loan
- registration fee to put a lien on your car
- installation fee to put a GPS tracker and ignition immobilizer in your car
Find out how much a title loan may cost with this infographic.
Insurance and title loans
Your title loan lender will ask for proof of insurance on your car when you apply for a title loan. You have the right to get insurance from any insurance provider you choose.
Lenders do this to make sure they get their money back if something happens to your car. For example, if your car is in an accident or stolen.
In some provinces and territories, you must let your insurance company know any time there’s a new lien on your car. If you don’t and your car is in an accident or stolen, your insurance company may deny your claim. This means that you would be responsible for paying the remaining cost of your title loan yourself. It also means that you may no longer have your car.
Check with your insurance company before you get a title loan.
Paying back a title loan on time
If you miss a payment or can’t pay back your title loan by the due date:
- the lender may charge you a fee if there isn’t enough money in your account
- your financial institution may also charge you a non-sufficient funds (NSF) fee
- you may enter into more debt and pay additional fees if you extend the term of the loan. Lenders also called this rolling-over the loan
- you may hurt your credit score
- the lender may activate a GPS tracking device and ignition immobilizer
- the lender may seize your car
- if the lender seizes your car, you may have to pay extra costs
Options to consider before getting a title loan
Before getting a title loan, consider whether you really need the money and how you’ll use it.
If you’re having trouble making your payments, you may end up going into more debt. Consider other options such as asking for a payment holiday or a lower interest rate credit card.
Find other options to get through financial difficulties.
Getting out of a title loan
If you get a title loan, the faster you pay it off, the less interest you’ll pay. You can increase your payments or pay off your loan completely, at any time, without penalty.
Make sure the lender removes the lien after you’ve paid off the loan.
Use the Financial Goal Calculator to make a plan to pay off your debt faster.
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