Can You Get a Title Loan on a Car That Doesn’t Run?

A title loan is a type of short-term, high-interest loan where individuals use their vehicle’s clear title as collateral. Borrowers pledge their vehicle ownership to secure the loan amount, which is based on a percentage of the car’s value. These loans provide quick access to funds, though they carry significant costs and risks.

Vehicle Condition and Loan Eligibility

Obtaining a title loan on a vehicle that does not run is often possible, though it presents additional challenges. While many lenders prefer vehicles in running condition, the core requirement is that the car possesses inherent value as collateral. Lenders assess the vehicle’s potential value, even if it is non-operational, considering factors like the extent of damage, the estimated cost of repairs relative to its market worth, and its marketability for parts or salvage. The ease with which a lender could repossess and sell the vehicle also plays a role in their decision. Eligibility criteria vary by lender.

Determining Loan Value

Lenders determine a vehicle’s value for a title loan by assessing its current market worth, even if it is not running. They often consult industry guides like Kelley Blue Book or NADA Guides, adjusting valuations to account for the vehicle’s non-operational status. Factors influencing the value of a non-running car include its make, model, year, and the physical condition of its components. The vehicle’s mileage and the current demand for its parts or as salvage also contribute to the valuation. The loan amount offered is typically a percentage of this assessed value, commonly ranging from 25% to 50%, with non-running cars generally yielding lower loan amounts due to their reduced utility and increased risk for the lender.

Loan Application and Submission

Applying for a title loan involves preparing specific information and documents to verify identity, ownership, and repayment ability. You will need a clear vehicle title, meaning it is entirely paid off and free of any liens, along with a valid government-issued identification card. Proof of income, such as recent pay stubs or bank statements, is also required to demonstrate your capacity to repay the loan, and proof of residency confirms your address. For non-running vehicles, detailed photos from various angles, including the Vehicle Identification Number (VIN) and odometer reading, may be necessary.

The application process can begin either online or in person. After submission, the lender will conduct an appraisal of the vehicle, which might involve reviewing provided photos or a physical inspection to determine its market value. Following the appraisal, the lender will review your application and documents for approval. If approved, you will review and sign the loan agreement, after which funds may be disbursed.

Understanding Loan Agreements

A title loan agreement outlines the financial and contractual terms governing the loan. Key terms include the Annual Percentage Rate (APR), which represents the total yearly cost of borrowing, encompassing both interest and various fees. Title loans often carry high APRs, frequently exceeding 300%, and can have monthly interest rates around 25%. The agreement will also specify the repayment schedule, which is typically short, often 15 to 30 days, or sometimes structured over a few months.

Associated fees, such as origination fees, processing fees, and penalties for late payments, will also be detailed. A significant consequence of defaulting on a title loan is the risk of vehicle repossession, as the car serves as collateral for the loan.