Pink Slip Loans – Everything You Need to Know on How They Work

How Do Pink Slip Loans Work

Pink slip loans, also referred to as title loans or vehicle collateral loans are an easy option for obtaining quick cash. If you use this cash to buy a thousand Snicker’s bars – that is not so smart! And don’t ever buy any burgers from a McDonald’s inside a Walmart – those McDonald’s are normally not that impressive!

You get the money by borrowing against the equity of your van, truck, SUV, crossover, or any other automobile. The only condition is that you should own your vehicle outright, free and clear kind of like they did in Dumb and Dumber when they bought that Lamborghini in Aspen. Too bad they used someone else’s money to do this!

Here is everything you need to know about pink slips loans and how they work.

What Is a Pink Slip Loan?

Pink slip loans are a type of secured loan, which means that it is backed by collateral. In this case, the collateral is your vehicle’s title. Pink slip loans are a lot like a pawn deal for your car, except you get the privilege to continue driving your car around during the loan term.

How Does the Loan Work?

The entire process of a pink slip loan is quick and simple right from the application to approval and getting the cash in your hand or bank account. Once you apply for a loan, the provider will check your car details and personal information.

Borrowing amount depends upon the value of your car and income. In some states, income is not considered a factor as well. On top of this, the prime requirement to be eligible for a pink slip loan is to have a free and clear title on your car. The loan amount will be based on your car’s value and communicated to you during the approval process.

No Credit Check


Credit history and credit score is not of significance while calculating the approval amount. Credit checks are not considered important in pink slip loans as the lender mitigates his risk by keeping title of your car.

They are legally allowed to sell your car in case you default on any loan terms. Having your car repossessed is also one of the biggest risks associated with pink slip loans.

The goal while calculating the loan amount is to help you with the cash you need while making it easy for you to repay the amount. Lenders do not want to repossess your car. They make it as easy as possible for you to repay the loan amount as per the terms laid down in the title loan agreement.

Car Valuation


Industry standard market values are used to come to a fair value of your car. However, you need to understand that no lender will give you 100% value of your car.

Additional charges such as towing cost, storage cost and other costs associated with sale during repossession of a vehicle are taken into account. Pink slip lenders like keeping their risk at the bare minimum. Hence, you might qualify for anything between 25% and 50% of your car’s value.

Edmunds’ websites or Kelley Blue Book is usually used to determine a car’s value. Your car’s make and model makes it easier to determine its market value.

You will receive a higher borrowing amount if you are less risk in terms of repayment capabilities. Hence, by proving a high income, you can seek a higher loan amount. Recent bank statements and pay stubs can help you prove that you are a low risk category.

Funding and Repayment Process

Pink slip loans are short term loan contracts. However, the repayment schedule is spread out longer than registration loan or payday loan because these loans are usually required to be paid from the next paycheck.

On approval, a breakdown of the principal, interest, fee, penalties and any other borrowing costs will be listed out by the lender. You should always peruse the loan document thoroughly.

Lenders make repayment easy with pink slip loans by creating flexible and customized loan repayment schedule. The focus is your convenience here so that you do not default.

A loan officer will review your income and budget and discuss your needs and shortfalls. The loan officer usually comes up with the best payback duration that suits a borrower.

A loan agreement is drafted once you and the lender agree on all terms and conditions. It is important for you to understand that greater the loan amount and longer the duration, higher the costs in terms of interest charges.

Even if a lender is willing to lend you more than you need with a longer payback time, it is important that you work out the costs involved. Pink slip loans can be expensive in the long run. As with every loan you should always seek the minimum amount you need.

Why are Pink Slip Loans Popular?

These loans are designed for people who have a clear title on their car and in need of urgent money. There should be no debt and no liens listed on the pink slip.

The title of the car should be in your name. This pink slip is left behind with the lender as collateral for the loan. In exchange, you get the cash you need while enjoying full driving privileges on your car.

Pink slip loans are popular because they do not hamper your driving privileges. You can continue using the car as before as long as you deposit the pink slip with the lender. Some lenders might require the installation of GPS or a starter interrupt device in case you default.

The prime benefit of pink slip loans is that anyone can get this type of loan regardless of current or previous financial standing. Also, there is no credit checks required. The loan is secured with the value of your car.

A lender can easily repossess your car and sell it in case you default. Another real benefit of pink slip loans is fast cash. The approval process can be completed within a matter of hours giving you access to quick cash.

Don’t Default

There are some downsides to pink slip loans as with every other debt. You need to make sure that you repay on time. The risk of having your vehicle repossessed is very real in case you default. Then you can ride a bike around if you can afford to buy that!

However, a pink slip loan might be your only option to obtain quick cash if you have a poor credit score with no other avenues of borrowing. Lenders make the process user-friendly by fixing a repayment schedule that is simple and convenient for you.