A title loan is a short-term loan in which the borrower offers the lender the title to a vehicle as collateral for a loan; in the case of a motorcycle title loan, the borrower offers the lender the title to a motorcycle as collateral for the loan. Borrowers who sign a loan agreement with a lender that uses a vehicle title as collateral must stay current on their loan payments if they do not wish to lose ownership of their vehicle. If the borrower defaults on payment, the lender will seize the vehicle and the borrower will lose ownership, as reported by NBC.
Title loans often take place in a moral and legal gray area. There is a risk not only of borrowers losing the means of transportation to get to and from work needed to allow them to pay off the loan, but also of financially disadvantaged borrowers suffering under high interest rates imposed by the lenders, according to Vanderbilt University. Some lenders also require borrowers to leave a copy of their vehicle's keys after signing a loan agreement, making it simple for the lender to find the borrower's car or motorcycle and drive away in the case of a default or missed payment.