Lesson 19 of 25 · 7 min
Title loans: the car as collateral
A title loan pledges the car at a rate that prices recovery measured in days.
A title loan pledges the car. Track 1 lesson 1 is the pledge: you continue to own the asset, and a second party has a claim on it. Track 1 lesson 2 is why a pledge that can be taken quickly prices differently from an unsecured claim. The clock here is days. Rules vary by state; a reader's own situation belongs with a qualified professional.
Cinderwell Title, invented. $1,200 for 30 days, fee $300. Annualized, ($300 ÷ $1,200) × (365 ÷ 30) = 304.2 percent. The fee is 25 percent of the principal for one month. The 304.2 percent is that fee on a year of 30-day steps, lesson 18's restatement pointed at a pledged car rather than at an unsecured two-week advance.
If the loan is not retired, the car can be taken. Track 22 lesson 23 is that taking on a car installment: a forced sale of the collateral, on a clock that need not include a cure window. This lesson does not re-teach repossession. It points at that procedure and names the pledge that makes the procedure available. The 304.2 percent is the price of a recovery the lender can run in days, which is Track 1 lesson 2's fast-recovery side, written on a title.
The car is the collateral. The $300 is a 30-day fee. The 304.2 percent is that fee as a year. If the loan is not retired, the taking is Track 22 lesson 23. Rules vary by state.
Key terms
- Title loan
- A short loan secured by the car's title. The car is pledged. Rules vary by state; a reader's own situation belongs with a qualified professional.
- Thirty-day fee
- On these figures, $300 on $1,200. Twenty-five percent of principal for one month.
- Taking
- The car can be taken if the loan is not retired. Track 22 lesson 23 is the procedure. This lesson does not re-teach it.
Worked example
A pledged car on a thirty-day clock
Cinderwell Title, invented. $1,200 for 30 days, fee $300. The car is pledged. Rules vary by state; a reader's own situation belongs with a qualified professional.
- Asset pledged
- The car
- Fee as a share of $1,200
- 25%
- Annualized cost
- 304.2%
- If not retired
- The car can be taken
- What the 304.2 percent prices
- Recovery in days
Track 1 lesson 1.
$300 ÷ $1,200.
0.25 × (365 ÷ 30).
Track 22 lesson 23. Not re-taught here.
Track 1 lesson 2's fast recovery.
The pledge is the car. The $300 is 25 percent for 30 days, 304.2 percent as a year. The taking, if it happens, is the procedure already taught.
Check yourself
Cinderwell Title advances $800 for 30 days with a $180 fee. What is the annualized cost, and what is pledged?
A title loan is a pledge of the car, Track 1 lesson 1, at a rate that prices fast recovery, Track 1 lesson 2, on a clock measured in days. Open What collateral actually is →
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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.