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Key takeaways
- A car title loan is a secured loan that uses your paid-off vehicle as collateral.
- Approval depends mainly on your car’s value and your income, not your credit score.
- Rates are often high but can’t exceed 35% APR, including most fees.
- If you stop paying, the lender can repossess your car, so borrow only what you can repay.
What is a car title loan?
A car title loan (also called a car equity loan or auto title loan) is a secured loan backed by a vehicle you own. The lender registers a lien against your car for the length of the loan. You keep driving it, and once the loan is repaid the lien is removed.
Because the car secures the loan, lenders take on less risk than with an unsecured loan. That’s why title loans are available to people with bad credit, and why they’re often approved quickly.
How a car title loan works
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Apply and get a valuation
You share details about your car (year, make, model, mileage) and your income. The lender estimates the car’s wholesale value, often with a quick inspection and photos.
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Get an offer
You’re offered a loan amount based on part of the car’s value and what you can afford to repay, along with a rate, a term and a payment schedule.
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Sign and receive your funds
The lender registers a lien on the vehicle, and the money is usually deposited within one or two business days.
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Repay and clear the lien
You make regular payments. When the loan is paid off, the lien is discharged and the car is fully yours again.
Car title loan requirements
Requirements vary by lender, but most will ask for:
A paid-off vehicle
Registered in your name with no other liens. Some lenders also have age or mileage limits.
Proof of ownership
Your vehicle registration, plus valid insurance.
Government ID
A valid driver’s licence, and you must be the age of majority in your province.
Proof of income
Pay stubs, bank statements or benefit statements showing you can make the payments.
Proof of address
A utility bill or bank statement with your current address.
Vehicle inspection
In person or by photos and video, to confirm the car’s condition and value.
How much does a car title loan cost?
Title loans usually cost more than bank loans, but they’re subject to Canada’s 35% APR criminal interest rate cap, which counts most fees and charges as interest. Here’s what a $5,000 loan over 24 months costs at different rates:
| APR | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 15% | $242.43 | $818.40 | $5,818.40 |
| 25% | $266.86 | $1,404.58 | $6,404.58 |
| 35% | $292.59 | $2,022.23 | $7,022.23 |
Look beyond the rate. Ask about setup and lien registration fees, prepayment penalties, NSF fees for missed payments, and any optional insurance added to the loan. Your loan agreement has to show the APR and the total cost of borrowing.
Pros and cons of car title loans
Pros
- Available with bad credit or no credit
- Fast approval and funding
- You keep driving your car
- Can be cheaper than payday loans or some unsecured high-cost loans
Cons
- Your car can be repossessed if you fall behind
- High rates compared with banks and credit unions
- You can usually borrow only part of the car’s value
- Fees and add-ons can raise the real cost
What happens if you can’t repay?
If you default, the lender can repossess and sell your car to recover what you owe. Depending on your province, you may still owe the difference if the sale doesn’t cover the balance, plus repossession and storage costs.
Provinces set the rules for repossession. Some require a court order once you’ve paid off a large share of the loan, and some make the lender choose between seizing the car and suing you for the balance. Our guide to car financing laws explains the rules in each province.
If you’re struggling, contact your lender before you miss a payment. Many will extend the term or arrange a payment plan rather than repossess.
Alternatives to a car title loan
Car loan refinancing
If you’re still paying off your car, refinancing can lower your payment or free up cash, often at a lower rate.
Credit union or bank loan
Personal loans and lines of credit from banks and credit unions usually cost much less if you qualify.
Secured personal loan
Backed by savings or another asset instead of the car you rely on every day.
Payment arrangements
Ask your creditors, landlord or utility company for a payment plan before you borrow.
Non-profit credit counselling
Free or low-cost help to build a budget and deal with debt, including debt management plans.
Build your credit
Better credit opens up cheaper options. Start with our credit building guide.
How to choose a title loan lender
- Check that they’re licensed. Several provinces, including Alberta, B.C. and Manitoba, require lenders that offer high-cost credit to be licensed. Check with your provincial consumer protection office.
- Compare the APR, not just the payment. A low payment over a long term can cost much more in total.
- Read the whole agreement. Look for prepayment penalties, mandatory insurance and what happens if you’re late.
- Avoid upfront fees. Legitimate lenders don’t ask you to pay a fee before you get your loan.
- Borrow only what you need. A smaller loan is easier to repay and puts less of your car at risk.
Car title loan FAQ
Can I get a car title loan with bad credit?
Yes. Because the loan is secured by your car, lenders focus mostly on the vehicle’s value and your ability to repay, not your credit score. Many approve applicants with poor credit or past bankruptcies.
Can I keep driving my car during a title loan?
Yes. You keep the car and drive it as usual. The lender registers a lien on it, which comes off when you repay the loan in full.
Can I get a title loan if my car isn’t paid off?
Some lenders will lend against the equity in a car you’re still paying for, but most want it fully paid off. If you still owe money, refinancing your existing car loan may be a cheaper way to get cash.
How much can I borrow with a car title loan?
Usually a portion of your car’s wholesale value, not its retail price. The exact amount depends on the car’s make, model, year, mileage and condition, plus your income.
What is the maximum interest rate on a car title loan in Canada?
Since January 1, 2025, the criminal interest rate in Canada is 35% APR, and it includes most fees and charges. Some provinces also have extra rules and licensing for high-cost lenders. See our car financing laws guide.
Will a car title loan affect my credit score?
It can. Many lenders report to the credit bureaus, so on-time payments can help your score and missed payments will hurt it. Some don’t report at all, which means repaying on time won’t help you build credit.
Looking for financing for a vehicle?
If you’re buying a car, we can help you find a car loan for any credit score. Checking your options won’t affect your credit.