Can I get a loan on my car title?
This is a common question for many individuals looking for fast cash to deal with situations like a financial emergency.
In Canada, car title loans are secured short-term loans wherein you use your car as security to obtain quick access to funds.
Find out how a car title loan works in Canada, how to get one, and the pros and cons and alternatives to car title loans.
Key Takeaways
- A car title loan is a short-term loan that lets you use your car equity as collateral for the loan.
- Car title loans are usually short-term, high-interest loans with fewer requirements. Most alternative lenders of cash loans for car titles accept all types of credit scores or credit histories.
- Alternatives to car title loans include personal loans, lines of credit, peer-to-peer loans and credit cash advances.
Car Title Loans Explained
Car title loans are short-term loans that let you use your car equity as collateral for the loan. These loans are usually short-term, high-interest loans with fewer requirements.
Do you have a low credit score? A car title loan may be ideal. It is a secured type of loan that lowers the lender’s risk. Title loan lenders often do not check your credit history.
The amount you can borrow depends on the value of your car. Many lenders approve car title loans of up to a predetermined percentage of a car’s value.
Since a car title loan is a secured loan, approval takes less time than other loan types. The typical requirements to apply for a car title loan may include the following:
- The car must not be more than 8 years old.
- You must have all the required vehicle registration papers.
- You must have complete insurance protection for your car.
- The vehicle must have no outstanding debt attached to it.
- You must be at least 18 years old, have a valid driver’s license, and own the car completely.
Related: Car Loans in Canada
How Car Title Loans Work
A car title loan works by letting you borrow money using your car as collateral. With a car title loan, you free up the built-in equity in your vehicle.
If you obtained financing for your car when you purchased it, it has to be completely paid off, or your remaining balance should be less than its current market value so you can apply for a car title loan. This will, however, depend on your lender.
Once your lender approves your loan application, it will deposit the cash directly to your bank account or issue you a cheque. You then start paying for your loan. As long as you keep making payments, you can continue to use your car.
With the lien in place, your lender has the right to take your vehicle into possession legally when you miss making payments for any reason, and you still owe them money. The lender may then sell your car to pay off your loan balance.
Can You Get Car Title Loans For Cars Over 10 Years Old?
While it will depend on your lender, approval for car title loans for cars over 10 years old is possible in Canada.
Some will approve a title loan for cars as old as 12 years, but the loan amount would be lower. Most, though, require a car to be no more than ten years old for a title loan to be approved.
Advantages of Car Title Loans
- Speedy access to money if you have no other option
- Fast approval
- Low credit scores are accepted
- Quick fund transfer after loan approval
- Flexible repayment options
- Quick fix for unexpected expenses
- No hard credit check
Downsides of Car Title Loans
- High interest rates than other secured loans
- Short repayment terms
- Missed payments can cause your lender to seize your car
- May require a vehicle appraisal to determine its value and condition
- Extra fees can add to the overall loan cost
Alternatives To Car Title Loans
Personal Loan
A personal loan can be an excellent way to access cash fast at a reasonable rate. These loans can be unsecured, so you will not need to provide collateral.
Use platforms like CarsFast and Loans Canada to find more affordable loan alternatives. CarsFast is a free car loan shopping resource where you can apply quickly and find lenders that pre-approve your loan.
While LoansCanada offers instant car title loans online through its partner lenders, it also offers numerous personal loan options. With the largest lender network, it accepts all credit scores, offers fast approval, and provides many affordable financing options. You only need to apply once to get multiple options.
Cars Fast
Cars Fast is a popular destination for getting a car loan regardless of your credit score. The platform has partnerships with top loan providers, including TD, Scotiabank, RBC, HSBC, and others.
Interest rate: Varies.
Loan term: 12-96 months.
Maximum loan amount: $75,000.
Eligibility: Earn at least $20,000/yr, reside in ON, BC, or AB; and be employed for 3 months+.
Loans Canada
Loans Canada is a loan comparison platform for all kinds of personal loans, car loans, debt consolidation loans, and bad credit loans. It has partnerships with some of Canada’s largest lenders and offers free access to your Equifax credit score.
Interest rate: 2.99% to 46.96%.
Loan term: 4-60 months.
Maximum loan amount: Up to $50,000.
Line of Credit
A line of credit (LOC) is a type of revolving credit that provides access to funds continuously, with limits set by the lender. You can borrow and repay as much as you want, provided that you do not exceed your credit limit and your account maintains its good standing. The interest rates for an LOC are usually variable and based on the lender’s prime rate.
Peer-to-Peer Loan
A peer-to-peer loan is a form of financial technology that allows you to borrow money funded by investors, cutting out typical financial institutions. Also called crowd or social lending, it connects borrowers to investors looking to get better returns on their cash savings. Interest rates for P2P loans are generally lower than bank loans.
Credit Card Cash Advance
A credit card cash advance can be expensive but have interest rates lower than a car title loan. With this alternative, you use your credit card to obtain a cash advance. Depending on your lender, you need a credit card, a line of credit and the ability to repay your loan within weeks.
Are Car Title Loans Worth It?
If you need a quick way to get cash, quick car title loans can be worth it. These loans help borrowers access funds fast since car title loan providers will often have less stringent requirements. The application and approval process is typically fast, which serves you well in an emergency.
However, it can be expensive because of high-interest rates. If you miss your payments, the lender can seize your vehicle, and you will lose your car. If you have no other recourse, choose a lender with better loan conditions and always make timely payments.
FAQs
Does a car loan build credit in Canada?
Yes, it does, provided you manage your loan responsibly. Financing your car adds diversity to your credit profile while also demonstrating your capability to reliably handle different kinds of credit. Timely car loan payments will also boost your credit score.
Can a foreigner get a car loan in Canada?
Depending on the lender, foreigners in Canada can be eligible for a car loan. Some dealerships also offer auto financing options and flexible repayment plans for immigrants without requiring a credit history.
How hard is it to get a car title loan in Canada?
Getting a car title loan in Canada is easy, especially if you obtain it from an alternative lender. Regardless of your credit score, you can easily get loan approval, provided you put up your car as collateral. Fund release is also typically quick.
