Car Title Loans

5 Common Car Title Loans Myths, Debunked

If you are facing an emergency, an outstanding bill, or even mortgage arrears, taking out a car title loan can be a great way to free up some cash. Unfortunately, there are so many myths and misconceptions about this type of loan, that you may be put off. Below, we’ll debunk five of the most common car title loans myths. How many of them do you believe?

Myth 1. Car Title Loans Require Credit Checks

Contrary to what you may have heard, most car title loan companies do not run credit checks. All you need is your own car, a clean car title, a valid ID, and proof of income. While some lenders may want to view your credit history, many do not have this requirement and let you take out a car title loan regardless of your credit score. Most car title loans can be approved over the phone or online within an hour or so. This means that you can take out a loan even if you have bad credit or no credit history.

Myth 2. Car Title Loans Require Employment Checks

While most traditional lenders such as banks will accept cars as collateral against personal loans, qualifying for these loans typically requires you to show you have been in work for at least three months. Car title loans from specialist lenders are completely different. These lenders conduct no employment checks before approving the loan and simply require proof of income. This income can come from temporary or permanent roles, so it doesn’t matter if you are self-employed or working in the gig economy. You simply need to show that you own your car outright and that the car’s title is clean and in your name. 

Myth 3. Car Title Loans Affect Your Credit Score

Despite what you may have read, applying for or taking out a car title loan will not affect your credit score. As noted above, most lenders never view your credit history, so therefore do not add search marks to your file. As car title loans are taken out against your auto, the only thing that lenders want to see is that your car is fully paid for and has no outstanding loans against it. As no credit checks are made when you apply for the loan, your credit score will not be affected and your credit score will not affect the rate you are offered. In fact, car title loans can actually improve your credit score if you use the cash to clear minor debts and arrears before they become problematic.

Myth 4. Car Title Loan Interest Rates Are Sky High

While it’s true that most car title loans come with a high annual percentage rate (APR), the horror stories you may have heard about sky-high interest rates don’t reflect reality. A car title loan is supposed to be a short-term emergency fix that is paid off rapidly. It is not supposed to be dragged out for months or even years at a time. Be sure to discuss this with the lender before you take out the loan, and check that you can repay the money within a reasonable time frame. You should also check that you won’t be subject to a prepayment penalty if you clear the debt early.

Myth 5. All Lenders Charge the Same Fees

There is a huge difference in the amount of fee you’ll pay from one lender to the next, so it makes sense to shop around and try to get the best deal. As we discussed above, some lenders will charge a prepayment penalty, meaning that paying off the loan early can see you hit with a charge. Other lenders don’t have this clause, so the onus is on you to check before you sign. There is also a big difference between the rates offered by different lenders, so make sure your offer is competitive before deciding whether to take out the loan.


These five myths about car title loans are incredibly pervasive, but that doesn’t make them true. Whether you have heard of these myths or not, it has never been easier to be approved for a car title loan and there are some great deals to be had. It pays to do your research and check multiple lenders to identify the best terms. 

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