By Gayle SatoTitle Loan vs. Secured Loan: Which Is Better?
By Gayle Sato
Quick Answer
Although they sound similar, secured personal loans and title loans are very different. Auto title loans use your vehicle as collateral on short-term loans with ultra-high interest rates and no credit check requirement. Secured personal loans typically have longer loan terms, lower rates and rely in part on your credit and income for loan approval.
When you need cash, a little collateral can go a long way toward helping you qualify for a loan, especially if your credit score is less than stellar. Two options you might consider are secured personal loans and auto title loans, but beware: There are important differences you should know about before you borrow.
While both title loans and secured loans require collateral, title loans are a short-term, high-interest option that carries considerable risk for borrowers. Here's a quick breakdown on secured loans versus title loans:
| Title Loan | Secured Personal Loan | |
|---|---|---|
| Collateral type | The title to your car, truck, motorcycle or other vehicle | Savings, CDs, investments or other valuable assets |
| Loan term | 15 or 30 days | Two to five years |
| Interest rates | Very high | Lower than title loans |
| Offered by | Lenders that specialize in title loans | Banks, credit unions and online lenders |
| Credit check | Often not required | Required |
| Key risks |
|
|
What Is a Title Loan?
A title loan uses your vehicle as collateral to secure a short-term, high-interest loan, often without a credit check. Although title loans may seem fast and easy to access, they're also expensive and can be risky to borrowers. Auto title loans aren't like regular car loans—or any other loans you might get from a bank.
Car title loans share common features that are uncommon in traditional lending:
- Short terms: Many title loans are due in 15 to 30 days.
- High interest and fees: You may pay 25% of the loan amount in fees on a one-month loan—equivalent to an annual percentage rate (APR) of 300%. Fees may include processing or loan origination fees, plus extras like mandatory roadside assistance.
- Based on your car's value: Loans generally top out at 25% to 50% of your vehicle's value.
- Ownership required: You may need to own your vehicle free and clear, and you will likely have to provide the lender with your vehicle's title until the loan is repaid.
- Automatic rollovers: Loans may automatically roll over if you don't pay the full amount due. A rollover will cost you a second round of interest plus fees.
- High seizure risk: You may be required to sign over your car's title and install a GPS device on your vehicle so the lender can easily track it down and repossess it if you default.
In short, title loans may be easy to get, but they're often difficult to pay off. If you can't pay off your loan on time, you could easily end up with loan rollovers (and escalating debt that's harder and harder to pay off) or the loss of your car.
Be aware: Title loans are heavily regulated or prohibited in many states and may not be available where you live.
Learn more: What Is Collateral?
What Is a Secured Loan?
A secured loan can be any loan that uses your property as collateral. If you default on a secured loan, you may forfeit the collateral you've pledged so the lender can sell it and use the proceeds to pay off your loan. Common examples of secured loans are mortgages, home equity loans and car loans.
Personal loans may also be secured by collateral. A personal loan lets you borrow a lump sum and repay it with interest in fixed monthly installments. A secured personal loan may help you qualify for a loan you otherwise wouldn't be approved for or get a lower interest rate. This is especially true if your credit score is on the lower end of the spectrum.
Learn more: Personal Loan Requirements to Know Before You Apply
Types of Secured Loans
Most types of personal loans are unsecured, but some banks, credit unions and online lenders may offer secured personal loans that use your assets as collateral. Here are a few examples of (and variations on) secured personal loans:
- Share-secured loans: Sometimes known as passbook loans, these loans use your savings, certificate of deposit (CD) or money market accounts to secure a personal loan. Share-secured loans are available from banks, credit unions and some online lenders.
- Securities-backed credit: If you have substantial investment assets, you may be able to access a securities-backed loan or line of credit from your bank or brokerage firm.
- 401(k) loan: Although this arrangement is different from a conventional secured personal loan, a 401(k) loan lets you borrow money from your employer-based retirement savings.
- Cash value life insurance: You may be able to borrow against the cash value of a whole life or universal life insurance policy.
You might also use valuable personal assets, such as antiques, collectibles, precious metals, art or jewelry, to secure a personal loan.
Learn more: What Can Be Used as Collateral on a Personal Loan?
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View all of our Best Personal Loans for 2026 to see what you’re likely to qualify for, and the rates and terms you might get.
Should I Get a Secured Personal Loan or a Title Loan?
A secured personal loan offers several advantages over a typical auto title loan, including much lower interest rates and more reasonable repayment terms. If you'd like to find out what your options are, check with your bank or credit union, or consider using an online marketplace to find and compare secured personal loans.
Wherever you decide to apply for a loan, be sure to review your loan documents carefully: Lenders are required to explain your loan's APR and total costs. Look closely at the documentation they provide and, if possible, compare multiple options to help ensure you're getting the best deal.
Additionally, make sure you understand what happens if you're unable to make your payments.
Alternatives to Title Loans and Secured Personal Loans
If you're in need of quick cash but aren't sure title loans or secured loans are the way to go, consider these strategies:
- Negotiate with your creditors. You may be able to get a one-time extension on your rent or permission to skip a payment without penalty to free up some cash.
- Look for a payday alternative loan from a credit union. Some credit unions offer short-term payday alternative loans that can float you a little cash. Interest rates are high, but typically lower than what you might get from a payday lender or title loan company.
- Ask for a card loan. Some credit cards have programs that allow you to convert a portion of your available credit card credit line into a loan. Interest rates or fixed monthly fees are typically lower than interest would be on a cash advance. Not all cards (or cardholders) are eligible, so check with your card company for availability.
- Check out paycheck advance apps. Apps like Chime or MoneyLion let you access a portion of your paycheck ahead of schedule through fee-free overdraft protection, instant loans or cash advances. Your loan is repaid automatically when your paycheck arrives. Paycheck advance apps are not to be confused with payday loans, which are high-interest and have terms that can lock people into cycles of escalating debt.
- Borrow from friends or family. This can be a great way to borrow without interest or a credit check, but be sure to have a repayment agreement in writing to preserve your relationship.
Be aware: Another alternative to a title loan is a credit card cash advance. Cash advances are expensive, too, and they aren't generally a good way to borrow. But, they may still be less costly than a title loan.
Frequently Asked Questions
The Bottom Line
Using assets as collateral can help lower your loan costs or improve your chances of getting approved. Secured personal loans have advantages over title loans, including lower interest rates, longer loan terms and fewer stipulations like auto-renewals that may land you further in debt or at greater risk for repossession.
Building and maintaining good credit gives you more options when you need a loan. Whether you need a loan now or are considering one in the future, checking your credit scores and credit report is a great place to start. You'll get a better handle on what types of loans and rates are available to you, and get suggestions on things you can do to help improve your credit score so you can improve your outlook over time.
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About the author
Gayle Sato
Gayle Sato writes about financial services and personal financial wellness, with a special focus on how digital transformation is changing our relationship with money. As a business and health writer for more than two decades, she has covered the shift from traditional money management to a world of instant, invisible payments and on-the-fly mobile security apps.
Read more from Gayle