When cash is tight and you already have a loan on your car, a second lien title loan may sound like a quick solution. These loans let a new lender place a second security interest on your vehicle so you can borrow against remaining equity. Approval is harder than a first lien and usually requires your current lender’s written consent.
Before you apply, understand the rules, costs, and safer alternatives like refinancing or a lender buyout.
Note: Some states prohibit multiple liens on a single vehicle. Many lenders do not allow second liens at all. Written consent from the first lienholder is typically required.
Key Takeaway
- You cannot stack two separate title loans on the same car without the first lender’s written consent.
- First liens get paid before second liens if you default.
- Costs are high; compare total cost and consider refinancing or a buyout first.
- Approval depends on equity, income, state rules, and the first lienholder’s policy.
- Online applications are common, but expect extra verification for second liens.
| Topic | First Lien Title Loan | Second Lien Title Loan |
|---|---|---|
| Lien position | Primary | Subordinate |
| Consent needed | No | Yes, from first lienholder |
| Availability | Common (varies by state) | Limited (many states/lenders prohibit) |
| Typical costs | High vs. prime auto | Often higher than first lien |
| Default priority | Gets paid first | Paid only after first lien |
| Better alternative | — | Refinance or buyout when possible |
What is a Second Lien Title Loan?
A second lien title loan lets a new lender record a second security interest on your vehicle while your original loan remains active. Because the first lender has priority, the new lender usually requires proof of remaining equity, on-time payment history, and written consent from the first lienholder. Many states and lenders do not allow second liens.
How Does a Second Lien Title Loan Work?
When considering approval for your second lien title loan, the new lender will review your vehicle’s title to determine if a second lien can be placed and evaluate the status of any existing liens. There are two primary scenarios in how the new lender interacts with the current lienholder:
- The new lender pays off the original loan and takes over as the primary lienholder. In this case, the vehicle’s title is updated to reflect the new lienholder’s position. For example, if your existing car lien has a remaining balance of $1,000 and the new lender approves you for a $4,000 title loan, they will pay off the $1,000 to the original lienholder and provide you with the remaining $3,000.
- The new lender places a second lien on your vehicle’s title, while the original lender remains the first lienholder. You must continue making payments on your existing loan, while the new lender assumes responsibility for repayment in case of default. This arrangement means the first lienholder has priority in repayment if you default, and the second lienholder is paid only after the first lien is satisfied.
Loan approval depends on several factors, including the vehicle’s current market value, your ability to repay the loan, and the status of any existing liens on the vehicle’s title. Because second lien title loans carry higher risk for lenders, they typically come with higher interest rates and fees.
Many lenders require a vehicle inspection, sometimes at a storefront location, to verify that the car’s condition and market value sufficiently cover the loan amount. This step ensures the lender can recover the loan value if repossession becomes necessary.
Note: Understanding how second lien title loans work is essential before proceeding, as failing to make payments can lead to repossession, regardless of lien position, and negatively impact your credit score. Always consider your financial situation carefully and explore alternatives such as refinancing your existing loan or other personal loan options.
Can I Get a Second Title Loan?
Yes, you can get a second title loan, but there are important conditions.
Multiple Title Loans on Different Vehicles
If you own more than one qualifying vehicle, you may qualify for multiple title loans, one per vehicle, provided each meets lender criteria.
Using the Same Vehicle for a Second Loan
You cannot have two title loans on the same car simultaneously. However, after paying off your first title loan, you might qualify for a second loan on the same vehicle, though the loan amount may be lower due to depreciation.
Second Lien Loans on Financed Cars
Obtaining a second lien title loan on a financed car requires permission from your primary lender. Not all lenders offer this option due to added risk and complexity.
Qualification Requirements
You must have enough equity in your vehicle and provide required documentation such as a valid government-issued ID, proof of income, and vehicle ownership. Some lenders may consider credit history, but bad credit may still be acceptable.
Requirements for a Second Lien Title Loan
For a second lien title loan, the requirements are similar to the first title loan. You will need to provide a valid ID, such as a driver’s license or passport, to verify your identity. However, you also need approval from the first lienholder for the additional lien.
The Requirements Are As Follows:
- A state-issued ID
- Proof of income
- Proof of residency
- Proof of address
- Photos of the qualifying car
- Proof of vehicle insurance
How to Get a Second Lien Title Loan
Applying for a second title loan on the same car is similar to what you experienced while getting your current title loan. Many lenders now offer lien title loans online, allowing you to complete the application process remotely without visiting a physical location.
The 4 Simple Steps Involved:
- Fill Out an Application: Most lenders will request information like your name, address, etc., to confirm your eligibility.
- Provide Required Documents: Submit the relevant documents mentioned earlier to provide proof that you can repay the loan.
- Await Approval for a Loan Agreement: Approval may be delayed due to the need for second lienholder permission.
- Get your Loan: You’ll receive an offer with details like loan amount and loan terms. If satisfied, sign the contract.
Benefits of a Second Lien Title Loans
- Access to quick cash especially in case of an emergency
- Loan term of about 36 months with flexible payment terms for some lenders
- Accepts good credit, bad credit, and no credit in many cases
- No hidden fees or prepayment penalties
- Borrowers can continue to use their cars while repaying the loan
5 Things to Consider Before Applying for a Second Lien Title Loan
Second title loans are designed to serve as short-term solutions for unforeseen financial emergencies. However, you need to be sure it is the best solution for you.
Therefore, before opting for second title loans online, consider these few things:
- Impact on Your Debt Profile:
Consider how the loan will affect your overall financial situation and debt burden especially if you have other high-interest debts. Taking on a second lien title loan means you may need to make additional payments with the same amount of income, which can affect your budget. - Understand the Total Cost Implication of the Loan:
Beyond the principal amount, be aware of the interest rate and other additional charges. So, calculate the total cost involved instead of diving in headfirst. - Risk of Repossession:
Consider the possibility of losing your car in case of repossession and whether you can manage without it. - Alternative Loan Sources:
Consider seeking alternative loans with lower costs, such as borrowing from friends or family members. - Read the Fine Print:
Ensure you understand all the terms and conditions of the loan agreement including the interest rate, repayment schedule, and consequences of defaulting.
How to Repay a 2nd Lien Title Loan
- Get a Title Loan Quote: Reach out to your lender and request for a payoff quote. This informs you about the total amount you need to repay your loan in full. If you have an existing title loan, the lender will coordinate the payoff and release of the lien once the loan is settled.
- Repay your Loan: Depending on your loan servicer, you can repay your loan in person to a specific money transfer location, over the phone, or online. Make sure you continue paying your existing title loan obligations until the second lien title loan is fully repaid.
After repaying the total amount, including the interest, and other related fees, the lien will be removed from the title. Your title will then be sent back to you by your state’s Department of Motor Vehicles via mail. This might take 15 business days or more based on your state.
What Happens if You Don’t Repay Second Lien Title Loans
Lenders give borrowers a few months to repay the loan based on the agreement. However, if you default on a second lien title loan, you may face serious consequences, including:
- Damage to your credit score, as missed or late payments negatively impact your credit history
- Falling into an endless cycle of debt due to high interest rates and fees
- Repossession of your vehicle, which can occur regardless of lien priority
It’s important to understand these risks before taking out a second lien title loan. If you anticipate difficulty making payments, communicate with your lender as soon as possible to explore options such as extending your repayment period or adjusting your payment plan to avoid default and protect your credit and vehicle.
Lender Tip:
If you’re unable to repay your loan, speak to your lender before missing any payments. They might be able to extend your repayment period or adjust your repayment plan to help you avoid defaulting and losing your car.
Remember, both you and the lender aim to avoid loan default and ensure timely repayment.
Other Alternatives to Second Lien Title Loans
If you are looking for an alternative to a second title loan, you can consider these options:
- Borrow from family and friends
- Personal loans
- Payday loans
- Title loan refinancing
- Title loan on financed cars
FAQs
What is the Difference Between a First Lien and Second Lien?
The first lien has the first claim and higher priority on a borrower’s collateral for car title loans, while the second lien has the claim and lesser priority.
Put simply, if a borrower defaults in repayment and the collateral is sold, the original lienholder is paid first, while the second lienholder is paid thereafter.
Where Can I Find a Second Lien Title Loan?
To begin, you can start by filling out our free uncomplicated online request form. This will help determine if you qualify for a second lien title loan.
Once you qualify, get a free estimate and compare offers from multiple licensed lenders to choose the one that best suits your specific needs and interests.
Furthermore, you need to reside in a state where multiple vehicle liens are a thing.
How Do Second Lienholders Determine Your Loan Amount?
Second lienholders evaluate your vehicle’s current value, source of income, other financial commitments, your chances of repaying the loan, and the outstanding loan amount on your first lien. Having positive equity in your vehicle, meaning its value exceeds the amount owed, can increase your chances of qualifying for a second lien title loan and may result in a higher loan amount.
How Much Cash is the Highest Loan Amount I Can Receive with a Second Lien Title Loan?
You can get a title loan as high as $50,000 or 50% of your car value. Be aware that not having a lien-free title will likely reduce the amount of loan that might be approved.
When Will You Be Credited?
If your loan request is approved, you can access your money through direct deposit or MoneyGram locations as fast as on the same business day or the next business day.
Can I Have Two Title Loans on the Same Car?
Yes, you can have two title loans on the same car but it can be a challenging process because of the lien holder and high risk involvement.
Final Words
Securing a 2nd lien title loan requires careful consideration of your financial situation and the risks involved.
By using your vehicle’s title as collateral for additional funds, you can access the financial assistance you need. However, it’s crucial to weigh the terms and conditions, including potentially higher interest rates, before proceeding.
Feel free to contact us right away to start your application process, regardless of your credit status or existing liens. We also offer a free estimate for second lien title loans.
