Sometimes you may find yourself at financial rock-bottom and in need of some fast cash. Getting rejected by traditional lenders such as banks and loan associations because you are unemployed and unable to provide proof of income, can be even more frustrating. That’s why you should consider going for a car title loan instead.

What do traditional lenders ask for?

Traditional lenders have a long list of requirements to tick off including:

  • Proof of income: This is how lenders determine how likely you are to repay that loan. 
  • Collateral: Lenders ask for proof of ownership of some kind of property like your car or real estate so that in case you fail to make your loan payments, they can seize your property and sell it off.
  • Credit rating: Banks ask for your credit report to get your FICO score and income-to-debt ratio. If you have a bad history, they will not loan you money.
  • Cosigner: Sometimes, if your credit score is too low, banks ask for a cosigner with a better score. The cosigner then becomes liable in case you are unable to repay the loan. 

Can I still get a title loan if I am unemployed?

Do you own a car? If you do, then yes! Yes, you can get a title loan.

That’s all there is to a title loan: you only need a title with no liens on the car (a car title is proof that you own the car). You do not need to have a good credit rating, cosigner, or even a job! Your car will be your collateral.

Additionally, it only takes a few hours to get approved compared to the days and weeks it might take in approving a bank loan. 

Dave Ramsey’s take on title loans:

This is probably the best option if you need some fast cash. If you’re unemployed and in really bad shape, the money from a title loan can give you a chance to breathe for a while and get back up.

What are the requirements for securing a title loan if unemployed?

The requirements are few and simple:

  • You must be over 18 years of age
  • You must provide an official photo ID
  • As mentioned above, no liens are allowed on the car (the bank or any other lender should not already have a claim on the car for some previous debt)
  • The car must be owned by you—either 100% or you must have at least some equity in the vehicle
  • You must provide the original car title—the documents proving you own the car
  • The lender may also ask to see your car for an inspection

What are the terms of getting a title loan without a job?

A title loan applies to all vehicles, not just cars. The lender will gauge the value of your vehicle and loan you a percentage of what it is worth. According to an article on Titlelo,the loan typically ranges from 25-50% of the car’s price and the term is quite short—usually within a month. 

Since you are unemployed, be warned about the following things:

High interest rates

According to an article on Finder, one of the drawbacks of title loans is the very high interest rates they charge compared to any other loan. They charge around 25% of the principal amount per month as interest. This would make an APR (Annual Percentage Rate) of 300-400% which is very high! 

If you default, the lender will repo your car

Title loans are generally considered high-risk. There aren’t any forgiveness programs out there for local title loans if you default. However, if you are unable to pay by the end of the month (e.g., considering you had a 1-month term), they may let you roll over to the next month. But this comes at the cost of more interest.

If this continues, you could amass a lot of debt that you are not capable of paying off. Sometimes, the lenders offer Refinances. This means you can ask for your monthly payment to be lowered if it is too overwhelming. 

Eventually, if you amass too much debt and can’t pay it off, the lender will repo (repossess) your car. So in the worst case, you’ll end up losing your car completely.

Bottom line: if you’re unemployed, a title loan can definitely get you fast cash but it is certainly not the cheapest option. If it is your preferred option, then look for the lowest APR and only borrow as much as you can be sure to repay within the term!