Secured Personal Loans vs Auto Title Loans – which are Predatory?

EPF Last Update: May 23, 2020

Secured personal loans and auto title loans are very similar. In fact, auto title loans are considered to be a type of secured personal loans. But in reality, they are totally different! In fact, one can be a great option for some people. The other option is predatory.

Secured personal loans. Most people define personal loans as unsecured loans paid in installments. This definition is not completely correct because there are some companies that offer secured personal loans. You simply put something as a collateral, for example, your car, and you get the money. That way, the lender is sure that he will get his money back from you. These are also known as collateral loans.

Auto title loans. They are very similar to the aforementioned type. In fact, they are a type of secured personal loans. But in reality, they are totally different. They require you to put your car in a collateral in order to give you the money. The big difference is in the actual terms that are offered to you. The amount that you can expect to get is always below your car’s worth (about 40% of it). The APR is much higher, close to payday loans (about 300%). Auto title loans are predatory and they have to be avoided.

To understand the difference better:

  • Secured personal loans are similar to personal loans, the difference being that you secure your loan with a collateral.
  • Auto title loans are very similar to payday loans, the difference being that you have to secure them. They look like secured payday loans.

Auto Title Loans

To explain this concept better, let’s start with a quick overview of payday loans.

Payday loan lenders try to manipulate people with low credit score, lack of information, young people, people looking for fast cash, etc. They try to convince those people that they are their only option to get money. No credit score, no problem. Fast cash, no problem. That is the way they promote their services. They typically offer up to $1,000 fast cash and actually lend it, even if your credit score is really low. It’s really easy to get these loans. But after that, you find that the APR is insane. It’s about 400%! To illustrate, this means that for every $100, you pay about $15 for 2 weeks period. If you don’t pay the amount on time, lenders reserve their rights to require that you pay only the interest over the amount. But this amount doesn’t lower the principal amount of the money. And the process repeats until you pay the whole amount. This is known as a debt cycle.

Auto title loans are very similar. The difference is that, apart from the fact that you have to pay a very high APR, and the risk of getting into a debt cycle, there is also a risk to lose your car that you put as a collateral. When you agree to do this, lenders will give you a slight discount and the average APR of auto title loans are about 300%. Still a very bad deal!

The amount you can expect to get is lower than the price of your car! It varies, but according to some stats, it is about 40% of the amount of the car. Typically, you can expect between $100 to $10,000.

Typical profile of people who get auto title loans

  • People in need of fast cash.
  • People with a really bad credit report.
  • People with lack of knowledge (about the lending market) who don’t have time to research or haven’t come across a place with correct and legit information about loans.
  • Young people.


  • Lenders won’t perform a credit check. This looks really great to some people who actually have a low credit score. They don’t make a hard inquiry, which would lower the credit score. The truth is that most lenders that don’t perform a credit check also don’t care if you can repay the amount on time and only want to get you into a debt cycle. We highly recommend that you avoid lenders that don’t care about your credit report and financial situation!
  • Fast Cash! Although it is true that you will get your money fast, this is actually how these predatory lenders manipulate you! These days, there are so many companies that are ready to approve you for a personal loan very fast (within one business day), especially if the amount is not too high.


  • They are too expensive! The average APR that you can expect is about 300%. Do you know that these days many lenders are ready to give you absolutely reliable loan rates, of less than 36%, even if your credit score is not so high? Do you know that if you decide to risk losing your car, the rates will be significantly lower?
  • Risk of debt cycle. If you don’t repay the amount on time, you will be required to rollover This can become a long process, and in the end, you will have to pay much more than the amount you got.
  • You risk your car. The previous downside fully applies to payday loans as well. But with auto title loans, you also risk that lenders get your collateral. Statistics shows that about 20% of people lost their cars to repossession.
  • Hidden fees.

Reasons to avoid auto title loans

As we said, they are expensive, you risk getting into a debt cycle and also losing your car. But what if you don’t have any other options? Are you sure??? Do you know that the lending market is much more flexible these days and there are so many ways to get a loan? Here is what your options are in 2019, based on your credit score.:

  • You can always get an unsecured personal loan on reliable rates if your score is average or higher.
  • If your credit score is very bad, you can still get a personal loan. Try to shop around and get approved on high APR (but still under 36%), or if you want, you put your car as a collateral and get absolutely reliable rates. If you plan to risk your car, do it with personal loan lenders instead of auto title loans!

Are auto title loans legit?

Auto title loans are illegal in some states. However, even if they are illegal in your state, there can be some predatory lenders that try to get you through big peer-to-peer lending platforms. Make sure you recognize them. On our site, you will find many tips on how to find the right lender for you.


Auto title loans are predatory. We highly recommend that you avoid them, because they are very expensive and risky. In addition, if you shop around, you will find that there are always options for you, even if you have a bad credit score.

Secured Personal Loans

Personal loans typically offer from $1,000 to $50,000. You have the option to pick the best repayment installment plan, which is about 3-5 years. The APR is up to 36%. Now, can you see the difference between them and the previous option? It’s so obvious!

But why go secured, you ask?

When you secure your loan, lenders feel safer because they are sure that you can pay their money back on time. Therefore, they are ready to:

  • Approve you for a higher amount.
  • Decrease your APR.
  • Allow you to get a loan in the first place if you have really bad credit and no other options.


  • Competitive APR of up to 36%. With secured loans, you have a chance to lower it even more.
  • You can get a higher amount than with typical unsecured loans because lenders put more trust in you.
  • You work with lenders to pick the best repayment plan based on your income.


  • Hard inquiry is made on your file. This lowers your credit score.
  • You risk losing your collateral if you don’t pay the amount on time.

Typical profile of people who should get secured personal loans

  • People with really bad credit who don’t have many options. By putting your car in a collateral, you make your lender trust you more and they are ready to give you a loan.
  • People with a bad or fair credit score who want to lower their interest rates.
  • People who want to get a big loan and increase its amount significantly. If you need a big loan (including heavy equipment loans), you will be required to put something as a collateral.

Cases where it is NOT recommended to get a secured personal loans

We at ElitePersonalFinance highly recommend that you don’t use these loans:

  • If you have a good, average or excellent credit score. In these cases, your credit score will definitely enable you to get the loan on time. You will be approved for many unsecured loans. Still, going secured will lower your APR, but it is not necessary because the difference in values won’t be significant.
  • When you are not sure that you can pay the loan back on time. In this case, you risk your collateral, your credit report, and this leads to additional problems. Instead, read some tips from us on what to do if you can’t pay the loan back on time.

Can I get a secured loan with really bad credit?

Actually, yes. Recently, we’ve posted so many articles on our site, discussing the possibility of getting money with bad credit score. If you go secured, then your options are even better. The main problem when you go secured is if you can actually pay back the money.

What is the average APR that I can expect?

It varies, but to give you a basic overview of unsecured personal loans:

  • 720 – 850 : 10%
  • 690 – 719 : 15%
  • 630 – 689 : 20%
  • 300 – 629 : 30% or more if you have a really bad credit

With secured loans, you can expect these values to be lower by a few points.

Types of secured personal loans:

  • Online Lenders. Reputable lenders shouldn’t cross the 36% mark when it comes to APR. You have to expect that they will require your credit score and ask for your income history. Some companies let you apply for a secured loan upfront, but others can give you this option only after you have tried an unsecured loan.
  • Some banks offer you secured loans, but they are pickier about your credit score and income history. Your chances to get approved are lower than with online lenders, but if you get approved, you can expect a lower APR. Some of them also offer CD-secured lines of credit.
  • Credit Unions. You can’t get money from a credit union if you have really bad credit. But if not, expect competitive rates. Credit unions are non-profit organizations that will take a good look into your real financial situation. The don’t care only about your credit score, but also about income history, and the actual ability to repay the amount on time.

Do we recommend secured personal loans?

The quick answer to this question is Yes! But are you sure they are the best option for you? If you can’t get approved, this is because of your bad credit score. If you are approved, but you want to try to lower your APR, use them. But to find the best offers, shop around and compare them! We don’t want to say that secured personal loans are the best! They are only one recommended option that people should check while shopping around. But in the end, you pick your best offer.


ElitePersonalFinance did a lot of research to find options that people can use to avoid payday loans and get personal loans. Nevertheless, this is not always possible if you have really bad credit. But if you try to put a collateral, then it will be ridiculous to do it with an auto title loan lender. Getting a secured personal loan on reliable rates is much easier now.

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