How Does a Car Title Loan Work

This is a brief summary of a car title loan transaction. The exact details will vary depending on the state or province the car title loan takes place in. For a thorough discussion of how to make money in the car title loan industry, refer to our “Car Title Loan Business Start Up Manual.”

A customer who owns their car outright and has the title or “pink slip” drives their vehicle to your location. Most of us who make car title loans require at least the following from our customer:

  • A clear title to the car without liens or encumbrances
  • A duplicate set of keys
  • Proof of insurance including collision
  • Driver’s license
  • Phone bill
  • Proof of employment
  • Last 1-2 bank statements
  • Last utility bill
  • A minimum of 3 references with their complete contact information

Car title loan software is highly recommended for the above.

After the car title lender confirms the accuracy of all the application information (there are a multitude of data bases to perform these verifications) and verifies the “low-book” value of the automobile the car title loan is approved. Typically, the amount loaned on the vehicle (motorcycle, car, boat or RV) is 25% to 55% of this “low-book” value.

The car title loan consumer typically has 30 days to repay the loan principal and fees. Fees average 30% per month on the face amount of the car title loan. Of course, this varies greatly depending on where the car title loan takes place.

If the car title loan consumer is unable to repay the principal and fees on the date due, the car title loan lender usually collects the fees and agrees to extend the principal due date another 30 days.

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