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Do Title Loans Affect Your Credit Score?

Do Title Loans Affect Your Credit Score?

Title loans can be a great way to borrow money fast, and you don’t need a good credit score to get approved. But you may be wondering if title loans can have a positive or negative impact on your credit score. Let’s dive deeper into how online title loans work and whether or not they affect borrowers’ credit. 

 How Do Title Loans Work? 

A title loan is a secured loan that lets you use your car title as collateral to receive funds. In order to qualify for a title loan, you have to own or have equity in your vehicle. Once you fill out a title loan application, the lender will conduct an appraisal of your car and will offer you a loan amount worth 25 to 50% of its value.  

 When you get approved for a title loan, you’ll temporarily surrender your car title to the lender in exchange for the funds, and you can continue driving your car as you repay the loan. Loan repayment periods for title loans can range from a few months to a few years, depending on the lender and loan terms. Keep in mind that the lender can repossess your car if you don’t pay off the loan, so make sure you can afford to make loan repayments before applying. 

 How Do Title Loans Affect Your Credit Score? 

Typically, a title loan won’t have a good or bad impact on your credit score. Since many title lenders don’t do a hard credit inquiry when you fill out an application for a title loan, you won’t see a dip in your credit score after you apply. You may not see your credit score improve either, since title lenders normally don’t report your payments to the credit bureaus. 

 Even though paying off your title loan may not affect your credit score, you should try to make on-time payments and pay off the loan in full. The lender won’t send collections after you, which can hurt your credit score, but they can repossess your vehicle and sell it to recoup the loss of the loan.  

 The Bottom Line 

If you have a poor or fair credit score and need to borrow money, a title loan may be a good option. Although title loans won’t have much of an impact on your credit score one way or another, be sure that you make your monthly payments on time and fully repay the loan. This way, you can avoid paying additional fees or having your car repossessed. 


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by Brian Perry // Brian Perry is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.