Car Title Loans in Canada: Here’s What You Need to Know

Woman getting out of title loan
PiggyBank is reader-supported. We may be compensated if you use, sign-up or apply for services through our links. See our Advertising Disclosure.

Lenders offer car title loans to borrowers who own a vehicle and are in urgent need of cash.

These loans require the borrower to pledge their vehicle as collateral, which the lender can seize and liquidate if the borrower defaults.

Despite this, the borrower retains full access to their car during the loan term.

Title loans are usually short-term, ranging from a few months to a year, although some can last several years.

Alternative lenders, rather than banks and credit unions, typically issue these loans and charge high-interest rates.

Title loans can cause financial hardship if not appropriately managed due to their excessive interest rates.

Key Insight

Lenders can charge interest rates as high as 60% per year on a title loan, the maximum permitted by federal law under section 347 of the Criminal Code of Canada

Ways To Get Out of Title Loans

If you’re eager to get out of a title loan, here are some ways of doing so:

1. Pay off your loan early

Promptly paying off your title loan is an ideal strategy, as it drastically cuts down your interest charges.

It will also result in that pesky lien being removed from your vehicle sooner rather than later.

If you’re low on cash, consider cutting back on non-essential expenses for a brief period so you can allocate more money toward the loan.

Acquiring a part-time job or taking on a side gig are excellent options to bring in extra income, as well.

2. Negotiate with your lender

If you’ve got a flair for persuasion, you might want to arrange a meeting with your lender to renegotiate more favourable loan terms. 

After a few months of steady payments, ask your lender if they can assign you a lower interest rate.

Naturally, your lender has a vested interest in you successfully making timely payments, as they profit from a steady stream of interest revenue.

If they see you’re experiencing financial difficulty, they may be more keen to lower the rate or extend the loan term to lessen your debt load.

3. Sell your car

If your title loan payments are too burdensome, you may be better off selling your car and using the proceeds to settle the loan balance, or at least most of it. 

Taking this route will save you a considerable sum of money in interest and fees, freeing up your cash flow for other expenses.

You can also use any leftover funds to purchase a cheaper vehicle.

4. Consolidate your loan

Replacing your title loan with another more affordable loan is another option to contemplate. 

A bank is your best bet to secure a fixed-rate loan at a competitive interest rate.

However, if you fail to meet banks’ qualification criteria, other feasible options include a credit union or alternative lender. 

Another potential solution is to ask a friend or family member to co-sign a loan with you, thereby increasing your chances of getting approved.

Considerations Going Forward

Suppose you’re in need of extra cash.

In that case, there are more financially prudent ways to acquire it than resorting to a title loan or other credit product that charges an exorbitant interest rate.

Here are a few ideas to consider:

1. Personal loan

Banks and credit unions offer personal loans, which come with cheaper rates than title loans, even if they’re unsecured.

And, the loan terms are usually longer, which translates to lower monthly payments. 

You may face challenges securing one with a bank if you possess a low credit score.

Still, there’s an abundance of lenders available in the alternative lending market that may be willing to extend you credit. 

2. Credit card

At first glance, a credit card may seem like a poor substitute for a title loan.

However, the average credit card interest rate is still considerably lower than the typical title loan rate.

If possible, you should prioritize credit cards that offer special promotional rates, which could be as low as zero percent.

Keep in mind these lucrative offers only remain in place for a limited time.

After that, the default rate kicks in, which can be steep, depending on the card. 

3. Additional Earnings

The most practical way to gain more cash without strings attached is to have a second stream of income.

The good news is that it’s easier than ever to generate extra money, especially online.

You can work part-time as a freelancer on the side without committing to any employer.

Frequently Asked Questions

  • Who can help pay off my title loan?
  • What happens if you don’t pay a title loan back?
Mark Gregorski

Mark is passionate about educating people on how the financial markets work and providing tips to help them better manage their money. Mark holds a bachelor’s degree in finance from the Northern Alberta Institute of Technology and has more than a decade of experience as an accountant.

Outside of writing and finance, he enjoys playing poker, going to the gym, composing music, and learning about digital marketing.