Auto title loans, sometimes called title pawns, are loans in which the consumer pledges the title to his vehicle to the lender as security for repayment of the loan. Generally, the consumer keeps possession of the vehicle during the term of the loan but is required to leave the title, and sometimes a set of keys, with the lender. If the consumer cannot pay the loan at maturity, the lender often renews the loan and adds more interest charges. If the consumer cannot keep up with the escalating debt, the lender repossesses the vehicle.

Most title loans are made for amounts that are far less than the value of the vehicle that secures the loan. Because the value of the collateral always exceeds the loan amount, the lender can risk making loans without considering the consumer’s ability to pay. Title loans are usually made for short terms, such as two weeks or a month. They have extremely high interest rates – sometimes as high as 900% APR (annual percentage rate).