What are pink slip loans?

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Pink slip loans are a type of secured loan program, associated with the ownership of an automobile.

A pink slip is a common term used to describe or refer to the car’s title. It comes from the 1950s and 1960s, when states like California printed the car’s title on pink-colored sheets of paper. During the peak years of hot rod races, some car owners would often put their pink slips on the line as they “raced for pink slips.”

A pink slip loan is also known as an automobile title loan or car title pawn financing, where a loan is issued to a borrower by a lender, with the borrower granting the lender the title to the car – for the duration of the loan.

  • Collateral. A pink slip loan, being a secured loan, is in contrast with typically unsecured loans such as cash advance and signature loans. An unsecured loan is a a type of financing that is issued without the pledge of any borrower assets to the lender as part of the loan agreement.
  • Title. A pink slip loan provides the lender with the title to and official ownership of the vehicle until the loan is repaid. The pink slip loan borrower still keeps possession and use of the car, but the title is held in the lender’s name.

Should the loan go into default, the lender has the right to recover, or repossess, the vehicle to satisfy the outstanding debt. If a vehicle is repossessed, a pink slip loan will typically have a redemption period as part of the loan’s recovery clause. If the borrower makes payment arrangements with the lender to bring the pink slip loan current the borrower may recover the vehicle.

A pink slip loan is a common form of financing when borrowers need short-term funds and need them quickly. To apply for a pink slip loan, the borrower completes a loan application and provides the lender with additional documentation such as a paycheck stub or bank statements documenting sufficient income to pay the debt as well as the title, or pink slip associated with the vehicle.

Pink slip loans will typically require that the vehicle is owned free and clear with no other financing associated with the car. In other words, the borrower must have possession of the car’s title or pink slip before a new pink slip loan can be provided.

There are no loan limits regarding pink slip loans, other than what the borrower can afford as well as guidelines established by the lender. At the end of the loan term and the loan is completely repaid, the lender returns the original title to the borrower, relinquishing all interest in the vehicle used as collateral.

Pink slip loan requirements and features

Pink slip loans offer distinct advantages for many car owners in need of cash:

  • Flexible credit requirements. The loan is secured by the car’s title and is usually much less than what the car is currently worth. So many title loan providers are willing to approve borrowers with damaged or less-than-perfect credit – who would otherwise not be able to get traditional financing.
  • Loan size. Pink slip loan amounts are primarily limited by the vehicle’s market or “Blue Book” value. If the automobile has a high resale value, then borrowers may be able to get higher loan amounts – compared to regular unsecured or personal loans.
  • Speed. Pink slip loans do take longer to process when compared with payday and cash advance loans. But some lenders do allow qualified borrowers to get their title loan funds within 24 hours of application approval.

A pink slip loan is not for everyone and carries the risk of having your car repossessed. But for car owners who need a fast personal loan and have possession of their car title, pink slip loans are one of many options to consider.

Disclaimer: NetCredit is a direct personal loan provider and does not provide financial advice, nor does it vouch for any vendor or service mentioned on our NetCredit personal finance blog or online consumer loan glossary. Always research and perform due diligence on any service provider or vendor before deciding to use them, and we recommend that you speak with a financial advisor regarding all decisions that will affect your finances.

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