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What Are Title Pawns, And How Do They Work

Title pawns have been around for decades and are a great way to get cash when a bank or other type of unsecured lender won’t work with you because of tight underwriting requirements. With an auto title pawn, you are handing over the vehicle to a lender or pawnshop as collateral for a secured loan. Fall behind on the loan and risk losing your car as the lender has the right to sell it at auction. Auto pawn companies are typically more lenient about how much they lend because the loan is backed by an actual vehicle, and they may not have to hire a tow company or repo agent to recover it.

Lenders take on these types of secured transactions with minimal underwriting because the loan is backed by the collateral in your vehicle. Title loan companies are also more understanding since they are working with something they can liquidate quickly to recoup their losses. At the same time, an unsecured lender can’t fall back on any collateral if the customer defaults on the loan. The good news for someone considering an auto title pawn is that since your lender already has possession of the vehicle, the interest rate or “APR” may be lower, as there is less risk than with a typical online title loan.

Title pawn loans range from $1,000 to $20,000, and you can sometimes pull out up to 60% of your vehicle’s equity value with a loan. Your vehicle’s resale value calculates your exact loan amount, and factors such as its age, mileage, and current condition will influence the loan amount and repayment terms.

What’s Required To Pawn A Car Title

To qualify for a title pawn, you need a vehicle with equity that is fully paid off. Like car title loans, you need a vehicle titled in your name(cosigners are sometimes allowed on the car’s title, but they’ll need to be added as a co-applicant to the loan agreement). While some lien free 2012 cars, motorcycles, and RVs will qualify as collateral for a title pawn, you stand the best chance of getting approved with a 2015 or newer vehicle with fewer than 100,000 miles.

You need proof that the vehicle is registered with your state’s DMV, that it has full insurance coverage, and, in some states, that it has passed a recent emissions test. Title pawn lenders will also require government-issued ID, proof of income from your employer, or bank statements showing you make enough money to afford the monthly payment.

Expect a vehicle inspection with any title pawn, which can occur at any local office or authorized repair shop. The inspection can be completed right before you sign over the car’s title, and most inspections are completed in 10 minutes or less. You’ll need to verify the mileage and VIN on your vehicle, and your lender may ask you to take the car on a brief test drive. They may ask to put an ignition switch or GPS tracking device on your vehicle, but that’s often only if you borrow $10,000 or more, which is more typical with title loans, where you don’t pawn the car itself.

What Else To Know About Title Pawning

Title pawning can be an effective way to get cash by tapping into your car’s equity. Even though the rates are high on these types of loans, your interest rate may actually be lower than a personal loan, as your lender has security in the form of your car title to fall back on if you ever default. Title pawns are also great for someone who needs cash quickly, as the most important underwriting requirements are having a paid-off vehicle and proof of income. Just think about someone applying for an unsecured loan and how much risk that lender is taking on by offering $1,000 or more. With a title pawn, they can offer a lower interest rate and not worry too much about your credit score because there’s significant equity backing the loan.

Another thing to remember about title pawning is that you can always renew or refinance your loan to obtain improved payoff terms. Whether you find a new lender or reach out to your existing title pawn company, there’s a chance you can get a reduction in your interest rate after you’ve made several on-time payments. Interest rates are high with an auto title pawn, and your lender doesn’t want to lose you to a competitor! They prefer that you keep making your monthly payments at the lower interest rate, rather than have another company buy out your loan. Contact Premier Title Loans at 800-250-6279 or apply online for a refinancing quote in minutes!

Difference Between Auto Pawn Loans and Auto Title Loans

Auto pawn loans differ from traditional car title loans and registration loans in one particular way. Yes, you are using your car’s equity or vehicle registration information as collateral for these types of loans. But with an auto pawn loan, you hand over the vehicle itself as collateral instead of your car’s title. This means you won’t have day-to-day use of your vehicle, which can be a big problem for someone who needs their car to get to work or get around town.

Another difference between title pawns and title loans is that you may be able to borrow more with a title pawn than you’d ever get with a title loan as your lender may already have the vehicle in their possession. While title loans offer higher loan amounts than unsecured loans, they’re still often capped at 50% of the vehicle’s value because you still get to keep your vehicle while making the payments. Yes, your lender has the car’s title as collateral, but what happens if you default on the loan and they can’t repossess your vehicle for whatever reason?

With a title pawn, though, your lender is holding the car as collateral, and they can immediately take possession of it once you fall behind. Unlike a title loan, there’s no need to hire a tow company and repossess the car if they already have it. Because of this, title pawning companies typically offer loans up to 60% of the vehicle’s resale value.

Benefits & Risks Of Title Pawns

An auto pawn can be a decent option for anyone with less-than-perfect credit who needs quick cash, especially compared to other loan offers that require excellent credit. Auto pawn companies, like title loan lenders, offer financing based on the vehicle’s value, which means loan amounts that can approach $20,000 for high value cars and trucks. Another benefit is that you can be approved with a poor credit score! Now compare that to personal loan lenders that require excellent credit, and you’ll see how easy it is to pawn your vehicle for a secured loan.

However, there are risks when you decide to pawn your vehicle, and the most severe consequence involves defaulting on the loan. In this scenario, your car will be repossessed and sold at auction if you don’t pay the amount due, plus any fees. Remember, by pawning your car, your lender becomes a lienholder on the vehicle, with the right to repossess and sell it if you don’t follow the loan agreement. Depending on your state’s laws, they can also pursue legal action against you for any remaining balance if the sale of your vehicle does not cover the amount you owe them.

Other risks involve the high interest rates associated with title pawns. While some banks charge interest rates of less than 25% for an unsecured loan that requires good credit, a title pawn can come with an APR much higher than that.

Apply For A Title Pawn With Premier Title Loans

Are you ready to see what loan amount and interest rate you can expect when you pawn your car title? Apply for a title loan with Premier Title Loans, and we’ll give you a quick no-obligation estimate. All it takes is your vehicle’s make, model, and year to get you a quote. Pre-approved customers with a newer, paid off vehicle and proof of income can now qualify for a title pawn of at least $1,000. Start the process online or call 800-250-6279 today!