Is Car Title the Best Collateral to Secure a Loan?

Car Title loan

Collateral is a great advantage when getting a loan, as it allows you to capitalize on the property you already have and save money. The provision of collateral reduces the interest rate and increases the trust of the lender in you, which makes it possible to get a loan on the most favorable terms. The only downside is that if you default on the loan, you may lose your property.

What is collateral?

Collateral is a certain possession of yours, part of the rights to which you transfer to the lender for the period of repayment of the loan. If the loan is not repaid on time, the full right to dispose of your property passes to the lender. The fact of providing a loan allows the borrower to look less risky in the eyes of the lender.

If you can boast of a good credit history, of course, you have all the chances to apply for online Installment Loans on COMPACOM. They would provide you with quick financing of up to $5,000 with guaranteed approval and same day money deposit.

If you want to take out a loan, especially with a bad credit history, then having collateral significantly reduces the APR and increases the amount that the lender can lend you.

What collateral can you use for loans? 

There are several types of collateral you can provide to a lender

  • Your car. On COMPACOM you can get Online Title Loans up to $10,000 with a quick same day direct deposit to your bank account. They are usually issued for a fairly short period of time (15-30 days) and is especially popular with people who urgently need funds for unforeseen needs.
  • Your house. This type of loan allows you to receive up to 85 percent of the total value of your home and all its savings.
  • Your savings account. This loan is most often used by credit unions and banks. In this case, all your savings are used as collateral.

Benefits and drawbacks of loans with a car title as collateral

If we talk about title loans, then they have a lot of advantages and disadvantages


  • Lower interest rates. Of course, if you are the owner of an excellent credit history, then you will be offered favorable interest rates. Otherwise, the interest rates are very high, and in order to lower them, the title loan is perfect.
  • Guaranteed approval. If your credit history leaves much to be desired, you can still count on a title loan, as thanks to such collateral, the chances of obtaining a loan are significantly increased.
  • Profitable terms. With low interest rates and fast approval times, you can often customize your loan terms to suit your preferences. so, you can pay off the loan faster to reduce the final cost or extend the repayment period so that the monthly payments are lower.


  • The risk of losing the car. If the loan repayment is late, the chances of losing the car increase significantly.
  • Long payment period. This may sound like an advantage to you, but it actually means that your final loan amount will be much higher.
  • Misuse of funds. The ease of obtaining this type of loan can lead to unreasonable use of the money received and even higher interest rate spending in the future.

Unsecured Personal Installment Loans vs Auto Title Loans – Which are Better?

It is worth saying that these two types of loans are similar in their approval speed and the fact that credit history may not always matter. Otherwise, the two types of loans differ significantly.

  • Unsecured installment loans. The biggest advantage of online installment loan comes from their construction – you borrow as much as you want and pay off for as long as you want without any collateral. You do not have to worry whether the new loan will withstand your home budget. Not only that, by choosing a sufficiently long repayment period, you can adjust the amount of the monthly installment to the possibilities of your household budget.
  • Auto title loans. This type of loan is one of the secured loans, for which you need to provide collateral. A car loan involves you giving 51% of the car’s ownership to the lender, who in turn gives you 50 to 70 percent of the car’s value.

Who is a title loan ideal for?

  • young people
  • people with bad credit
  • people in need of very fast money
  • people who do not understand the financial market, they just wonder “how to get a title loan in Michigan with bad credit”, for instance, and do not want to spend time understanding this issue

Reasons to avoid auto title loans

Naturally, title loans are a quick and convenient option for people with bad credit or simply for people in urgent need of money. Here are some reasons to avoid a title loan:

  • if you have bad credit, you can still apply for a personal loan. The best solution would be to find a loan with APR 36% and below in order to be on less favorable terms.
  • if you have a good credit history, you can take an unsecure loan and not risk losing your property.


Title loans are a rather risky option for obtaining funds, so the most rational way would be to refrain from them and pay attention to other types of loans. Before applying, consult the Federal Trade Commission website to get detailed information of payday and title loans.

Unsecured Personal Installment Loans

Unsecured installment loans are characterized by the fact that they are tailored to the possibilities of a given client. This means that when making a commitment, an individual repayment schedule is set – these are the dates and amounts that must be paid in order to cover the entire amount borrowed. This is of great importance especially in the case of loans for several dozen thousand dollars. Installment non-bank loans are directed especially to customers who need to get a fairly large sum in a short time. Using standard bank loans involves a long waiting period for the decision, which results from the need to carefully check your credit history. Installment loans are different – you can get the necessary money on the same day, a few hours after submitting the application.


  • The lender allows you to give out the largest possible amount, judging by your proof of income
  • You do not risk losing your property


  • You cannot get such a loan without a proof of income
  • The interest rate is also quite high, since the loan repayment term is long.

Who should get unsecured personal loans

  • young people who are over 18 but do not yet have a credit rating to take a loan from a bank
  • people with bad credit history who need fast money.
  • people who need a large sum of up to $35,000, which a title loan cannot guarantee

Payday loan in installments – Maximum amount

As for the maximum amount we can borrow, it all depends on what company we are applying for and whether it is our first or next loan. It is known that if we have already repaid a loan in a given company, we are a trustworthy customer in her eyes and the next loan may already be granted for a higher amount, because the risk of not paying it back drops. As for the first loan, we can count on a maximum of 5 to 10 thousand dollars. It is best to take new loans constantly in one and the same company to build a positive customer profile and better credibility. We can then count on much better conditions.


Through observation and analysis of the two types of loans, it can be concluded that each of them meets the needs of its target audience. Both loans are available for clients with bad credit history. However, if you have the opportunity to provide proof of income, then it is better to refrain from borrowing with collateral.

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The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.