Title Loan Glossary
Understanding title loan terminology is essential before making borrowing decisions. Our comprehensive glossary explains key terms like APR, LTV ratio, lien, repossession, and more in plain language.
All Terms (A-Z)
Acceleration Clause
A contract provision that allows the lender to demand immediate full payment if you violate loan terms (like missing a payment). This means the entire balance becomes due at once rather than in installments.
Amortization
The process of spreading loan payments over time. An amortization schedule shows how each payment is divided between principal and interest. With installment title loans, early payments often go mostly toward interest.
APR (Annual Percentage Rate)
The yearly cost of borrowing money, expressed as a percentage. APR includes the interest rate plus any additional fees, giving you a complete picture of the loan's cost. Title loan APRs typically range from 100% to 300%.<sup>1</sup>
Balloon Payment
A large, lump-sum payment due at the end of a loan term. Many title loans require the full balance (principal plus interest) as a single balloon payment rather than smaller installment payments.
Borrower
The person who receives and is responsible for repaying a loan. As a title loan borrower, you agree to repay the principal plus interest and fees according to the loan terms.
CFPB (Consumer Financial Protection Bureau)
A federal agency that protects consumers in the financial sector. The CFPB regulates lending practices, handles consumer complaints, and provides educational resources about loans, including title loans.
Charge-Off
When a lender writes off your debt as a loss after prolonged non-payment (typically 120-180 days). This severely damages your credit score. The debt may be sold to a collection agency that will continue pursuing payment.
Clear Title
A vehicle title free from any liens, claims, or encumbrances. A clear title means you own the vehicle outright with no outstanding loans against it. This is required for most title loans.
Collateral
An asset pledged as security for a loan. In title loans, your vehicle serves as collateral. If you fail to repay the loan, the lender has the right to seize the collateral to recover their money.
Compound Interest
Interest calculated on both the principal and previously accumulated interest. Compound interest causes debt to grow faster than simple interest. Some title loans may use compound interest, especially with rollovers.
Credit Union
A member-owned financial cooperative that often offers lower interest rates and more favorable terms than traditional banks or title lenders. Many credit unions offer emergency loans and financial counseling.
Debt Cycle
A situation where borrowers repeatedly renew or roll over loans, paying fees and interest without ever paying down the principal. Many title loan borrowers become trapped in debt cycles due to high costs.
Default
Failure to meet the terms of a loan agreement, typically by missing payments. Defaulting on a title loan can lead to repossession of your vehicle, damage to your credit, and additional fees.
Deficiency Balance
The amount still owed after your repossessed vehicle is sold. If your car sells for less than what you owe, you're responsible for the deficiency balance. For example, if you owed $3,000 and the car sold for $2,000, you still owe $1,000.
Disclosure Statement
A document that lenders must provide outlining all loan terms, including interest rate, APR, fees, total cost, payment schedule, and consequences of default. Read this carefully before signing.
Fair Debt Collection Practices Act (FDCPA)
A federal law that protects consumers from abusive debt collection practices. It limits when and how collectors can contact you, prohibits harassment, and gives you rights to dispute debts.
Finance Charge
The total cost of borrowing, including all interest and fees. Federal law requires lenders to disclose the finance charge so borrowers can compare loan costs. This helps you understand the true cost of your loan.
Funding Method
How you receive your loan money. Options typically include direct deposit to your bank account, check, cash, or prepaid debit card. Direct deposit is usually the fastest option.
GAP Insurance
Guaranteed Asset Protection insurance covers the difference between your vehicle's value and what you owe if it's totaled or stolen. While not directly related to title loans, having GAP insurance protects you from owing more than your car is worth.
Grace Period
A time period after the payment due date during which you can pay without penalty. Not all title loans include a grace period. If offered, it's typically just a few days. Don't rely on grace periods as a payment strategy.
Hard Credit Pull
A credit check that can slightly lower your credit score. Hard pulls typically occur when you formally apply for credit. Multiple hard pulls in a short period can add up.
Installment Loan
A loan repaid through scheduled, typically equal payments over time. Each payment includes a portion of principal and interest. Some title lenders offer installment plans as an alternative to balloon payments.
Interest Rate
The percentage charged on the principal loan amount for borrowing money. Title loans often have monthly interest rates of 25% or more.<sup>1</sup> Unlike APR, the interest rate doesn't include additional fees.
KBB Value (Kelley Blue Book)
A widely-used reference for determining the fair market value of a vehicle based on its make, model, year, mileage, and condition. Many title lenders use KBB or similar guides to assess how much they'll lend you.
Late Fee
A penalty charge applied when a borrower fails to make a payment by the due date. Late fees can add significantly to your total loan cost and may trigger additional consequences like default or increased interest.
Lender
A financial institution, company, or individual that provides loans to borrowers. In the title loan industry, lenders are typically specialized companies licensed to offer secured vehicle title loans.
Lien
A legal claim on property as security for a debt. When you get a title loan, the lender places a lien on your vehicle title. This lien remains until you repay the loan in full.
Lien Release
A document from the lender confirming that the loan has been paid and the lien has been removed from your vehicle title. You need this document to transfer the title or sell the vehicle.
Lienholder
The party (usually a lender) who holds a lien on your property. During a title loan, the lender is the lienholder. Their name appears on your title until the loan is repaid and the lien is released.
Loan Modification
A change to the original loan terms, such as extending the repayment period or reducing the interest rate. If you're struggling to repay, contact your lender to ask about modification options.
Loan Term
The length of time you have to repay the loan in full. Title loan terms typically range from 15 to 30 days, though some lenders offer longer installment plans. Shorter terms mean higher monthly payments but less total interest.
LTV Ratio (Loan-to-Value)
The percentage of your vehicle's value that a lender will loan you. For example, if your car is worth $10,000 and the lender offers 50% LTV, you could borrow up to $5,000. Most title lenders offer 25% to 50% LTV.
Maturity Date
The date when the loan must be paid in full. If you haven't repaid the loan by the maturity date, you may face default, additional fees, or be offered a rollover. Mark this date on your calendar.
Origination Fee
A one-time fee charged by lenders to process a new loan application. This fee covers administrative costs and is typically a percentage of the loan amount or a flat fee. It's usually deducted from your loan proceeds.
Payday Alternative Loan (PAL)
A small-dollar loan offered by federal credit unions as an alternative to payday and title loans. PALs have capped fees, lower interest rates, and longer repayment terms, making them a safer borrowing option.
Personal Loan
An unsecured loan from a bank, credit union, or online lender that doesn't require collateral. Personal loans typically have lower interest rates than title loans but require better credit to qualify.
Pre-Qualification
An initial assessment of whether you might qualify for a loan, usually based on basic information. Pre-qualification doesn't guarantee approval but gives you an idea of potential loan amounts and terms.
Prepayment Penalty
A fee charged for paying off a loan before the scheduled end date. Many title loan lenders don't charge prepayment penalties, allowing you to save on interest by paying early. Always verify the prepayment policy before signing.
Principal
The original amount of money borrowed, not including interest or fees. For example, if you borrow $2,000, your principal is $2,000. Interest and fees are calculated based on this amount.
Proof of Income
Documentation showing you have regular income to repay the loan. This can include pay stubs, bank statements, tax returns, benefits letters, or other evidence of earnings.
Proof of Residence
Documentation confirming your current address. Acceptable proof typically includes utility bills, bank statements, lease agreements, or government mail. Lenders need this to verify your identity and contact information.
Refinancing
Replacing an existing loan with a new one, typically with different terms. You might refinance a title loan to get a lower interest rate, extend the repayment period, or consolidate debt. The new loan pays off the old one.
Repossession
The legal process by which a lender takes back a vehicle when the borrower defaults on the loan. Title lenders can repossess your car if you don't make payments. The vehicle may then be sold to recover the debt.
Right of Rescission
Your legal right to cancel a loan within a specified period (typically 3 business days) without penalty. Not all states or loan types include rescission rights. Check your agreement for this protection.
Rollover
Extending a loan by paying only the interest (or fees) due and rolling the principal into a new loan term. Rollovers can trap borrowers in a cycle of debt as they continue paying interest without reducing the principal.
Same-Day Funding
Receiving loan proceeds on the same business day you're approved.<sup>2</sup> Many title lenders offer same-day funding, making title loans attractive for emergency expenses.
Secured Loan
A loan backed by collateral that the lender can claim if you default. Title loans are secured loans because your vehicle title guarantees the loan. Secured loans typically have lower interest rates than unsecured loans.
Simple Interest
Interest calculated only on the principal balance. With simple interest, you don't pay interest on accumulated interest. Many title loans use simple interest, making it easier to calculate your total cost.
Soft Credit Pull
A credit check that doesn't affect your credit score. Some title lenders use soft pulls for initial assessment. You may see this on your credit report, but it won't lower your score.
State Licensing
The requirement that lenders be licensed by state regulatory agencies to legally offer loans. Always verify that a title lender is properly licensed in your state before borrowing.
Title Loan
A secured loan where the borrower uses their vehicle title as collateral. The lender places a lien on the title, and the borrower continues to drive the vehicle while repaying the loan. If the borrower defaults, the lender can repossess the vehicle.
Truth in Lending Act (TILA)
A federal law requiring lenders to disclose key loan terms, including APR, total costs, and payment schedule. TILA helps borrowers compare loans and understand what they're agreeing to.
Uniform Commercial Code (UCC)
A set of standardized laws governing commercial transactions, including secured loans. UCC rules determine how liens are recorded, perfected, and enforced in title loan transactions.
Unsecured Loan
A loan not backed by any collateral. Personal loans and credit cards are examples of unsecured loans. Because there is no collateral, unsecured loans typically have higher interest rates and stricter credit requirements.
Usury Laws
State laws that cap the maximum interest rate lenders can charge. Some states have strict usury laws that effectively prohibit title loans, while others have few restrictions on interest rates.
Vehicle Appraisal
An assessment of your vehicle's current market value. Lenders conduct appraisals (in-person or virtual) to determine how much to offer. Factors include make, model, year, mileage, condition, and local market demand.
Vehicle Equity
The difference between your vehicle's market value and any amount owed against it. If your car is worth $8,000 and you have no loans, you have $8,000 in equity. Title loans let you borrow against this equity.
Vehicle Title
A legal document that proves ownership of a vehicle. The title lists the owner's name and vehicle information (VIN, make, model, year). Title loans require you to have a clear title in your name.
Terms by Category
Basic Loan Terms
Title Loan
A secured loan where the borrower uses their vehicle title as collateral. The lender places a lien on the title, and the borrower continues to drive the vehicle while repaying the loan. If the borrower defaults, the lender can repossess the vehicle.
Collateral
An asset pledged as security for a loan. In title loans, your vehicle serves as collateral. If you fail to repay the loan, the lender has the right to seize the collateral to recover their money.
Principal
The original amount of money borrowed, not including interest or fees. For example, if you borrow $2,000, your principal is $2,000. Interest and fees are calculated based on this amount.
Secured Loan
A loan backed by collateral that the lender can claim if you default. Title loans are secured loans because your vehicle title guarantees the loan. Secured loans typically have lower interest rates than unsecured loans.
Unsecured Loan
A loan not backed by any collateral. Personal loans and credit cards are examples of unsecured loans. Because there is no collateral, unsecured loans typically have higher interest rates and stricter credit requirements.
Lender
A financial institution, company, or individual that provides loans to borrowers. In the title loan industry, lenders are typically specialized companies licensed to offer secured vehicle title loans.
Borrower
The person who receives and is responsible for repaying a loan. As a title loan borrower, you agree to repay the principal plus interest and fees according to the loan terms.
Interest & Fees
APR (Annual Percentage Rate)
The yearly cost of borrowing money, expressed as a percentage. APR includes the interest rate plus any additional fees, giving you a complete picture of the loan's cost. Title loan APRs typically range from 100% to 300%.<sup>1</sup>
Interest Rate
The percentage charged on the principal loan amount for borrowing money. Title loans often have monthly interest rates of 25% or more.<sup>1</sup> Unlike APR, the interest rate doesn't include additional fees.
Origination Fee
A one-time fee charged by lenders to process a new loan application. This fee covers administrative costs and is typically a percentage of the loan amount or a flat fee. It's usually deducted from your loan proceeds.
Late Fee
A penalty charge applied when a borrower fails to make a payment by the due date. Late fees can add significantly to your total loan cost and may trigger additional consequences like default or increased interest.
Prepayment Penalty
A fee charged for paying off a loan before the scheduled end date. Many title loan lenders don't charge prepayment penalties, allowing you to save on interest by paying early. Always verify the prepayment policy before signing.
Finance Charge
The total cost of borrowing, including all interest and fees. Federal law requires lenders to disclose the finance charge so borrowers can compare loan costs. This helps you understand the true cost of your loan.
Simple Interest
Interest calculated only on the principal balance. With simple interest, you don't pay interest on accumulated interest. Many title loans use simple interest, making it easier to calculate your total cost.
Compound Interest
Interest calculated on both the principal and previously accumulated interest. Compound interest causes debt to grow faster than simple interest. Some title loans may use compound interest, especially with rollovers.
Loan Structure
LTV Ratio (Loan-to-Value)
The percentage of your vehicle's value that a lender will loan you. For example, if your car is worth $10,000 and the lender offers 50% LTV, you could borrow up to $5,000. Most title lenders offer 25% to 50% LTV.
Loan Term
The length of time you have to repay the loan in full. Title loan terms typically range from 15 to 30 days, though some lenders offer longer installment plans. Shorter terms mean higher monthly payments but less total interest.
Maturity Date
The date when the loan must be paid in full. If you haven't repaid the loan by the maturity date, you may face default, additional fees, or be offered a rollover. Mark this date on your calendar.
Balloon Payment
A large, lump-sum payment due at the end of a loan term. Many title loans require the full balance (principal plus interest) as a single balloon payment rather than smaller installment payments.
Installment Loan
A loan repaid through scheduled, typically equal payments over time. Each payment includes a portion of principal and interest. Some title lenders offer installment plans as an alternative to balloon payments.
Amortization
The process of spreading loan payments over time. An amortization schedule shows how each payment is divided between principal and interest. With installment title loans, early payments often go mostly toward interest.
Grace Period
A time period after the payment due date during which you can pay without penalty. Not all title loans include a grace period. If offered, it's typically just a few days. Don't rely on grace periods as a payment strategy.
Title & Ownership
Vehicle Title
A legal document that proves ownership of a vehicle. The title lists the owner's name and vehicle information (VIN, make, model, year). Title loans require you to have a clear title in your name.
Clear Title
A vehicle title free from any liens, claims, or encumbrances. A clear title means you own the vehicle outright with no outstanding loans against it. This is required for most title loans.
Lien
A legal claim on property as security for a debt. When you get a title loan, the lender places a lien on your vehicle title. This lien remains until you repay the loan in full.
Lienholder
The party (usually a lender) who holds a lien on your property. During a title loan, the lender is the lienholder. Their name appears on your title until the loan is repaid and the lien is released.
Lien Release
A document from the lender confirming that the loan has been paid and the lien has been removed from your vehicle title. You need this document to transfer the title or sell the vehicle.
Vehicle Equity
The difference between your vehicle's market value and any amount owed against it. If your car is worth $8,000 and you have no loans, you have $8,000 in equity. Title loans let you borrow against this equity.
KBB Value (Kelley Blue Book)
A widely-used reference for determining the fair market value of a vehicle based on its make, model, year, mileage, and condition. Many title lenders use KBB or similar guides to assess how much they'll lend you.
Vehicle Appraisal
An assessment of your vehicle's current market value. Lenders conduct appraisals (in-person or virtual) to determine how much to offer. Factors include make, model, year, mileage, condition, and local market demand.
Loan Risks & Problems
Default
Failure to meet the terms of a loan agreement, typically by missing payments. Defaulting on a title loan can lead to repossession of your vehicle, damage to your credit, and additional fees.
Repossession
The legal process by which a lender takes back a vehicle when the borrower defaults on the loan. Title lenders can repossess your car if you don't make payments. The vehicle may then be sold to recover the debt.
Deficiency Balance
The amount still owed after your repossessed vehicle is sold. If your car sells for less than what you owe, you're responsible for the deficiency balance. For example, if you owed $3,000 and the car sold for $2,000, you still owe $1,000.
Rollover
Extending a loan by paying only the interest (or fees) due and rolling the principal into a new loan term. Rollovers can trap borrowers in a cycle of debt as they continue paying interest without reducing the principal.
Debt Cycle
A situation where borrowers repeatedly renew or roll over loans, paying fees and interest without ever paying down the principal. Many title loan borrowers become trapped in debt cycles due to high costs.
Acceleration Clause
A contract provision that allows the lender to demand immediate full payment if you violate loan terms (like missing a payment). This means the entire balance becomes due at once rather than in installments.
Charge-Off
When a lender writes off your debt as a loss after prolonged non-payment (typically 120-180 days). This severely damages your credit score. The debt may be sold to a collection agency that will continue pursuing payment.
Loan Options & Alternatives
Refinancing
Replacing an existing loan with a new one, typically with different terms. You might refinance a title loan to get a lower interest rate, extend the repayment period, or consolidate debt. The new loan pays off the old one.
Loan Modification
A change to the original loan terms, such as extending the repayment period or reducing the interest rate. If you're struggling to repay, contact your lender to ask about modification options.
Payday Alternative Loan (PAL)
A small-dollar loan offered by federal credit unions as an alternative to payday and title loans. PALs have capped fees, lower interest rates, and longer repayment terms, making them a safer borrowing option.
Personal Loan
An unsecured loan from a bank, credit union, or online lender that doesn't require collateral. Personal loans typically have lower interest rates than title loans but require better credit to qualify.
Credit Union
A member-owned financial cooperative that often offers lower interest rates and more favorable terms than traditional banks or title lenders. Many credit unions offer emergency loans and financial counseling.
GAP Insurance
Guaranteed Asset Protection insurance covers the difference between your vehicle's value and what you owe if it's totaled or stolen. While not directly related to title loans, having GAP insurance protects you from owing more than your car is worth.
Legal & Regulatory Terms
CFPB (Consumer Financial Protection Bureau)
A federal agency that protects consumers in the financial sector. The CFPB regulates lending practices, handles consumer complaints, and provides educational resources about loans, including title loans.
Truth in Lending Act (TILA)
A federal law requiring lenders to disclose key loan terms, including APR, total costs, and payment schedule. TILA helps borrowers compare loans and understand what they're agreeing to.
Disclosure Statement
A document that lenders must provide outlining all loan terms, including interest rate, APR, fees, total cost, payment schedule, and consequences of default. Read this carefully before signing.
Right of Rescission
Your legal right to cancel a loan within a specified period (typically 3 business days) without penalty. Not all states or loan types include rescission rights. Check your agreement for this protection.
State Licensing
The requirement that lenders be licensed by state regulatory agencies to legally offer loans. Always verify that a title lender is properly licensed in your state before borrowing.
Usury Laws
State laws that cap the maximum interest rate lenders can charge. Some states have strict usury laws that effectively prohibit title loans, while others have few restrictions on interest rates.
Fair Debt Collection Practices Act (FDCPA)
A federal law that protects consumers from abusive debt collection practices. It limits when and how collectors can contact you, prohibits harassment, and gives you rights to dispute debts.
Uniform Commercial Code (UCC)
A set of standardized laws governing commercial transactions, including secured loans. UCC rules determine how liens are recorded, perfected, and enforced in title loan transactions.
Application & Approval
Pre-Qualification
An initial assessment of whether you might qualify for a loan, usually based on basic information. Pre-qualification doesn't guarantee approval but gives you an idea of potential loan amounts and terms.
Soft Credit Pull
A credit check that doesn't affect your credit score. Some title lenders use soft pulls for initial assessment. You may see this on your credit report, but it won't lower your score.
Hard Credit Pull
A credit check that can slightly lower your credit score. Hard pulls typically occur when you formally apply for credit. Multiple hard pulls in a short period can add up.
Proof of Income
Documentation showing you have regular income to repay the loan. This can include pay stubs, bank statements, tax returns, benefits letters, or other evidence of earnings.
Proof of Residence
Documentation confirming your current address. Acceptable proof typically includes utility bills, bank statements, lease agreements, or government mail. Lenders need this to verify your identity and contact information.
Same-Day Funding
Receiving loan proceeds on the same business day you're approved.<sup>2</sup> Many title lenders offer same-day funding, making title loans attractive for emergency expenses.
Funding Method
How you receive your loan money. Options typically include direct deposit to your bank account, check, cash, or prepaid debit card. Direct deposit is usually the fastest option.
Ready to Get Started?
Now that you understand the terminology, take the next step. Our quick application connects you with verified lenders.
Start Your Application