Financing a car can be challenging especially for middle and low-income earners, and as such, they often rely on loans. Many people new to loans are quite unfamiliar with the difference between a car title loan and auto loan. Some erroneously believe that both have the same meaning since it involves a vehicle and it’s not surprising that some people use the two terms interchangeably. This article will show you the difference between an auto loan and a car title loan.

What is an Auto Loan?

Auto loans are typically the loans acquired in purchasing a new or an old vehicle. In auto loans, consumers apply for the loan mainly to buy a car which may be new or old.

What is a Car Title Loan?

A car title loan is basically a short-term loan, usually within 30 days where a vehicle owner who outrightly owns the car uses it as collateral in securing a loan. The lender takes possession of the car title until the borrower fulfills the terms of the contract, thus the name, “Car Title Loan.”

We will compare Auto loan and Car Title Loan using the following factors;


An auto loan can extend up to five years while a car title loan is usually within 30 days.

Ease of Access

The auto loans application process is often longer and more tedious when compared to car title loan which can be done online and the money disbursed within a couple of hours after completing the application.

Interest Rate

Since auto loan interest extends over a more extended period, car buyers will end up paying more accumulated interest over the time. For car title loan, although the interest rate may look high, it doesn’t compound making a car title loan have a lesser rate.

Amount of Loan

When an auto loan is accessed, the amount of money the lender can disburse is usually higher. It corresponds with the value of the car the borrower wants to purchase, but in a car title loan, the amount a borrower can get is usually lower

Use of Security

The most auto loan requires that the borrower use their property as part of the contract. Thus, auto loans are typically secured loans while car title loan doesn’t need the use of collateral. Therefore it is an unsecured loan.

Down Payment

To get the best deal when accessing auto loan, buyers should consider making a down payment; this encourages lenders to give out the loan faster. For a car title loan, there is no need to make a down payment.

Credit Score Consideration

Bad credits affect the chance of lenders granting car buyers loan. With a not-too-good credit history, the borrower stands the risk of losing out on loan. For a car title loan, credit history is not always a barrier.

Now that we have analyzed the difference between an auto loan and a car title loan, we believe that borrowers have a better understanding of the two types of loans.