Car Title Loan

What is a Car Title Loan?

Financial institutions in Canada offer various loan services to their clients, including car loans, mortgages, business loans, and more. Loans are one of many ways that people strive to meet their immediate needs before a payday. At one time or the other, we all need money to sort out essential and urgent needs. When the required funds are not available, the next option is to take a loan.

As Canada’s population increases with the influx of people to the Great White North, lenders have raised the stake for loan requirements. As a result, getting approved for a loan becomes highly competitive. However, there’s a type of loan with minimal requirements, known as a car title loan. Note, this is different from a car loan.

A car title loan is one of the types of loans available to Canadians, with flexible interest rates, loan terms, and requirements. Car title loans are designed for people with short time emergency cash needs like bill payments.

So, what does it take to access this loan type and its effect on your finances?

Car Title Loan Explained

There are few things to note when discussing Car Title Loans.

Title loans are of diverse types, but the most common is the Car Title Loan. Title loans are quick loans that require assets as collateral, which in most cases have fast approval and require no credit ratings.

A car title is a legal document that serves as proof of ownership of a vehicle, as well as some vital information about the car, such as:

  • The full name and address of the owner or owners of the vehicle
  • The vehicle identification number (VIN)
  • The year, make, and model of the car, including the body type.
  • The colour of the vehicle
  • The date of issue of the car title
  • The engine number, and more

If you possess a car title, you can apply for a car title loan. A car title loan is a short-time loan that requires no credit check and can be used by borrowers to secure funds in advance for settling an emergency financial need by putting up their vehicle as collateral. If you have a low credit rating, you can conveniently get a car title loan because you’ll use your vehicle as collateral for the loan.

However, in the default or non-compliance with repayment agreements by the borrower, the lender can legally seize or repossess the vehicle to recoup their money.

How Car Title Loan Works

Recent research by SEMrush between March to September 2020 has revealed an increase in search demand for Canadian car title loans. According to the Boston-based marketing company, the internet search trends on car title loans for the period was 16,900 searches per month.

Compared with 5900 searches per month in the same period in 2019, this is an increase of about 11,000. This could be due to the effect of the global pandemic, Covid-19, which crumbled several economic activities and made millions of people lose their jobs and income.

Car title loans are short-time secured loans with minimal requirements and mostly no credit check. Hence, they come with high-interest rates. The high annual percentage rate (APR) can be as high as 30% to 300% interest. Lenders usually consider the value and condition of the vehicle to approve the loan to the borrower.

Borrowers who get title loans are required to enable the lender to temporarily possess the hard copy of their vehicle title and also place a lien on their car title. This is done as a form of security in case of default by the borrower. As a result, you must own your car entirely and have no other liens or obligations against your vehicle if you want to obtain a car title loan.

If the borrower defaults on their payments, the lender is permitted by law to repossess the vehicle and sell it to repay the outstanding debt. However, when the loan is repaid fully, the lien placed on the car title is removed, and the hard copy of the car title is returned to its owner. For the duration of the loan term, you can still use your car.

How to Get a Car Title Loan

Generally, to obtain a car title loan in Canada, you will need to seek the services of a loan company or lender, online or in-store. You may also need to possess or provide the following:

  • Be a Canadian citizen and of the age of majority in your province or territory.
  • Have a valid form of identification, such as government-issued identification, like a driver’s license.
  • Have proof of employment status or proof of income.
  • Car registration and a lien-free car title in your name
  • Car appraisal documents
  • Proof of residency (contact information and permanent address)
  • Car insurance documents

Key Factors to Note In Car Title Loans

  • Car title loans are short-time secured loans.
  • Car title loans require using your vehicle as collateral.
  • It usually requires no credit check; hence, suitable for people with a low credit score.
  • To obtain a car title loan, you must own a vehicle (such as a car, truck, motorcycle, etc.) and have complete ownership of the vehicle.
  • To obtain a car title loan, the vehicle must be in good shape and valuable
  • To obtain a car title loan, you must have a Car Title document in your name.
  • To obtain a car title loan, you must be a Canadian citizen or a permanent resident.
  • Car title loans come with high-interest rates, almost always higher than 100% interest.
  • Loan amounts can be as low as C$100. 


  • Car title loans require no credit check and can be obtained by people with low credit ratings. Lenders usually rely on the vehicle as collateral for the loan.
  • Car title loans have a fast approval rate. You can get approved for your loan on the same day.
  • The borrower can receive funds within a couple of days upon approval.
  • The borrower can continue to use the car during the loan period.
  • Car title loans require no initial down payment.
  • Can title loans can be used to cater to emergency financial needs, such as bill payments, debt management, etc.


  • Car title loans come with high-interest rates. This can lead a borrower with a low credit score to further financial challenges.
  • The borrower may risk losing his or her vehicle for non-compliance with payment agreements. If you cannot repay the loan, the lender has the right to possess and sell your car to offset the debt. If the car valuation is insufficient to cover the outstanding loan amount, the borrower will still pay the remaining balance on the debt.
  • Apart from the principal and interest payments, other charges are imposed on the borrower, such as administrative fees, lien registration fees, vehicle appraisal fees, and more.

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