How Collateral Works for Auto Title Loans

When obtaining an auto title loan, it’s important to realize that the lender will require you to put your automobile up as collateral against the loan.

An auto title loan (sometimes referred to as a pink slip loan) is a short-term loan that you secure with your car, truck, or motorcycle. This type of funding requires that you give the title of your car to the lender. The car will remain the lender’s property throughout the life of the loan. You will still be able to drive the car, but if you miss a payment, the lender will be able to take it. This is called repossession.

Many customers find it easier to be approved for this type of funding than other loan types. This is because there is less risk for the lender. Generally, auto title loan providers offer a loan amount for around 50 percent of your car’s value.

What is a Lien on My Car Title?

When you obtain an auto title loan, the lender will put a lien on your car title. A lien is the lender’s right to own your property during the life of the loan. After the loan is paid off, the lender will remove the lien, and you will get your car title back.