Most title lenders require car insurance to protect their interest in the vehicle. Title lenders want protection if the car is in an accident or stolen and unrecoverable.
If the vehicle is a total loss, the lender has no collateral and may have difficulty recouping the amount owed to them on car title loans. Insurance coverage may protect the car’s value and cover the lien on the title.
Key Takeaways:
- Most title loan lenders require comprehensive and collision insurance to obtain a title pawn loan
- Most states require liability insurance to cover others on the road
- Not carrying enough insurance may cause financial trouble with a title loan
- You must prove you can afford the loan and the vehicle has value
Do State Laws Require Car Insurance?
All but two states require drivers to carry liability car insurance.
Virginia and New Hampshire are the only two states that don’t, but there are still financial responsibilities drivers must face. This includes being financially responsible for any bodily injury or property damage you cause.
State laws don’t require you to carry collision or comprehensive insurance coverage because these coverages are for your vehicle only.
What Type of Insurance Do Title Loan Lenders Require?
Despite the state laws requiring liability insurance, most lenders require collision and comprehensive car insurance. This is because these coverage options protect your vehicle or the collateral for the loan.
Collision insurance: Covers the damage that occurred to your vehicle for an accident you caused.
Comprehensive insurance: Covers damage to your vehicle that occurs from something other than an accident, such as theft, vandalism, or nature, such as hail damage.
However, each title lender has different requirements regarding how much or the type of insurance they require for a car title loan. Many have a clause in their loan contract stating what coverage they require to approve an auto title loan application.
Collision vs. Comprehensive Insurance
Here’s how collision and comprehensive insurance compare.
| Collision | Comprehensive | |
| Covers | Accidents involving another car, property, or single-car rollovers | Damage from theft, vandalism, weather, trees, deer, fire, or other non-collision incidents |
| Doesn’t cover | Damage to other cars, damage to your car caused by something other than a collision | Damage to other cars, damage to your car caused by a collision |
| Required by state law | No | No |
| Required by title lenders | Usually | Usually |
| Has a deductible | Yes | Yes |
What Are the Risks of Not Having Full Coverage on a Car With a Title Loan?
Full coverage on a car means you have liability coverage, plus comprehensive and collision. Insurance coverage may provide financial protection if your car is in an accident. Without full coverage and a secured loan, you put yourself at risk.
The Risks of Not Having Full Coverage
- Being financially responsible for damages to another person’s car or property
- Being financially responsible for another person’s bodily injuries
- Losing your car without any financial protection
- Being on the hook for a title loan even if you no longer have the car
- Damage to your credit score if you don’t pay the title loan
How to Apply for a Title Loan Without Insurance
Since most lenders require car insurance to get a title loan, you may have to shop around to find a willing lender. If you can’t find a title lender willing to lend without insurance, you may find one that doesn’t require much coverage. Additionally, you can learn each lender’s specific insurance requirements during the application process.
Required Documentation for Car Title Loans
- Government-issued ID, such as a driver’s license
- Residency in the state you’re applying
- Provide proof of adequate income or the ability to repay the loan
- A title in your name
Do Title Loan Lenders Need To See Your Car for a Title Loan?
Online title loan lenders often don’t need to see the car for a title loan. They can use uploaded vehicle pictures to determine its condition and value. This is a key component of the approval process since the vehicle is the loan’s collateral.
The pictures must be clear and show all sides of the vehicle’s interior and exterior. The photos must also include the VIN and odometer for an accurate reading of the mileage.
FAQs
How Do I Pawn My Car Title?
To pawn a car title, you give up the title to the lender and in exchange, receive the approved funds. You agree to make monthly payments on the loan, and receive the car’s title back after satisfying the loan agreement.
When Is It a Good Idea to Pawn Your Car Title?
We strongly advise pawning your car title only in serious emergencies. Pawning your car title puts your car at risk of repossession, and they often have high interest rates. Instead, consider alternative options including:
- Borrowing money from friends or family
- Applying for a payday loan
- Applying for a credit union loan
These alternatives can help address your financial needs without putting your car at risk as collateral.
What Happens When You Pawn a Car Title?
When you pawn your car title, you surrender the car’s title to the lender while keeping possession of the vehicle. You can continue using the car as usual, but are unable to sell or transfer it until you pay the loan in full. The title loan lender retains the car’s title until you’ve met all loan agreement terms.
Can I Get a Car Title Loan With No Income Verification?
You must prove you can repay the loan, but this doesn’t mean you must have a job. If you have other sources of income, you may qualify for a title loan. The most significant factor is ensuring you can meet the loan terms and repay the loan as agreed. Consistent income in any form may be acceptable if you can satisfy the other requirements for a title loan.
Common sources of income title lenders allow include:
- Unemployment
- Disability
- Retirement income
- Inheritance
- Worker’s Compensation
- Self-employment income
So, while you can’t get a loan without verifying any income, it doesn’t necessarily mean employment income.
What Is a Lien-Free Vehicle Title?
A lien-free vehicle title means the car owner has no auto loans or title loans on the vehicle. Usually, title loan lenders want to be the only lienholder on the title to lend money on the car’s value.
Final Thoughts
Typically, you cannot pawn a car title without car insurance. Title loan lenders must protect their investment in the vehicle.
Without insurance, that is impossible. Since title loans should only be used for emergency cash, title loan lenders must ensure there is enough insurance coverage to at least cover the loan amount.
Most lenders require proof of insurance before they will fund a title loan. This goes beyond the standard liability insurance required by law. Title loan lenders want insurance that will cover damage to the car they invest in with the title loan.
If you need a title loan or have questions about how they work, we’re here to help you through your financial emergency.
Written by
5 Star Car Title Loans
