How does an auto title loan work?

In danger of being too vague, basically an auto title loan uses your car for collateral for the loan. This means if you default (miss one or more payments) on the loan, the company you borrowed money from could repossess your car. Be VERY careful if/when you get an auto title loan. Although they may let you "keep your car" (as a lot advertise as a "perk" to getting a loan with them) they may have very strict standards (i.e. repossessing the car if you are just one day late on a payment).

Buyer beware...

Such financial transactions only apply to a "clear title". It is illegal to attempt to procure a loan using a vehicle title that has a lien holder indicated.

Read the fine print. Some Companies will apply an early payment to principal and not to the upcoming payment. Example: Your payment is due on the 2nd of the month. You make a payment on the 1st. The the payment on the 1st will be applied to principal. You still have a payment due on the 2nd, and on the 3rd they may come to repossess your car. So, make a payment in person every month, and read all the fine print before getting this type of loan. Check with your BANK or Credit Union. Some Banks/Credit Unions also provide a title loan but with conventional rules.

Personal Experience:

Years ago I looked at getting a title loan. I read the fine print and was shocked at what I was reading. When I asked the lady who wanted to give me the loan how can you legally get away with this I was told "OUR MONEY OUR RULES".....My response was "My Car My Title" and walked out!