Car Title Loan vs. Auto Pawn Loan: What’s the Difference?

Two types of car loans people utilize when they need cash fast for a financial emergency are car title loans and auto pawn lawns. There is a difference between the two loans, which you need to understand to make wise borrowing decisions.

man with thumbs up and piggy bank

A car title loan is a type of loan you can be approved for even with bad credit, in certain states. It requires having a clear title with no other loans against the vehicle. Once approved for the loan, you have a set period to pay back the lender in full, plus interest. The annual interest rates on car title loans can be as much as 300% to 600% or more!

This can make it impossible for someone to pay back the loan. What normally occurs is the lender repossesses the vehicle because payments are not being made on time. Fortunately, if you live in Colorado, you do not have to worry about car title loans because they are illegal.

An auto pawn loan is different from a car title loan. Rather than turning the title over to the lender, you leave your vehicle and title with the lender. The pawn shop puts your car in a secure location, where it remains until you pay back the loan.

The interest rates are much more reasonable and make it possible to pay off the loan. Loan repayment periods can vary, based on the amount financed and other such factors. The pawn shop does provide full details regarding the repayment period, interest rate charged, and options should you need to extend the repayment period.

man handing money signing contract

Why Are Car Title Loans Illegal in Colorado?

To help prevent people from being taken advantage of during financial emergencies, car title loans are illegal in Colorado. Another reason these types of loans are illegal is that they use predatory lending practices. This means lenders take advantage of people in need of quick cash.

Lenders will only borrow a portion of the vehicle’s actual value. In many cases, they tell people their car is only worth a little amount when it is actually worth two to four times more. On top of that, they charge excessive interest rates, which makes paying back the loan impossible.

In addition, there are all sorts of car title loan schemes the lenders will use to get people to agree to a loan. They might say you can have an unlimited amount of time to pay back the loan, yet fail to put this in the contract you sign.

They tell people they have no other options. In other words, they make it seem like they are the only choice to secure a car loan, especially when a person has bad credit. As such, the Attorney General of Colorado does not tolerate these types of schemes or any type of car title loans.

In fact, in November 2016, Colorado Attorney General Cynthia H. Coffman won a judgment against a group running several illegal car title loan schemes within the state. The judgment brought much relief to the over 400 people taken advantage of by the group.1

man with money in hand

Benefits of an Auto Pawn Loan

Colorado does allow people to use their vehicles to get auto pawn lawns. There are several benefits of this type of loan, which can bring relief to people during financial emergencies.

  • You are free to decide if you want to repay the loan. You are under no obligation to pay back the loan unless you want your vehicle back. If you decide you simply want to sell the car for cash, you can do so without any further responsibilities.
  • You can convert unwanted vehicles into cash quickly. If you have a vehicle in good condition that you no longer need, you do not have to waste time trying to find a buyer. Instead, you can bring your car to our car pawn shop and sell it to us. In most cases, you can walk out the same day with cash in hand.
  • Loan amounts are based on what you can easily afford. The amount you can borrow is directly related to how much you can afford to pay back. Payments are designed to fit into your budget so you can pay off the loan and get your car back within the allowed time period.
  • You can extend the loan, if necessary, with a rollover loan. If you are having difficulties making payments on your auto pawn loan, you can request a rollover loan. This type of loan gives you more time to pay back the money and get your vehicle returned. However, there can be a new loan agreement you must sign and a small fee to roll over the loan.
  • You can get a new loan once the existing loan is paid off. You can keep using the same vehicle to get a new car pawn loan as often as you want. There are no limits to the number of times you can use your vehicle as collateral, as long as you have been paying off your previous loan.
  • Interest rates/fees are a flat fixed rate percentage. You will know upfront how much your interest rate and fees are so you know how much you need to pay back in total. For instance, if you get a $500 loan for 30 days, with 10% combined interest and fee, you would pay a total of $550 before the end of the 30-day period to get your vehicle returned to you.

As you can see, with an auto pawn lawn, the lender is not taking advantage of your financial emergency. Instead, they work with you to help get you through this rough patch and back on track.

Benefits of Buying a Car from a Car Pawn Shop

If you are shopping for a quality used car in good condition, you can find great selections at affordable prices at our car pawn shop. The vehicles we sell have been inspected to verify they are in good working condition, with no major body damage or mechanical problems. The majority of vehicles you find are those other people sold and converted into cash when they used our car pawn program and did not want to buy back their vehicles.

For car buyers, our inventories are constantly changing. You never know what great deal you will find on different models you are considering buying. In addition, you can always sell back any vehicle you buy and use the money to buy a different vehicle later.

couple with new car keys

One of the main benefits of buying from us is that you do not have to worry about your credit and being approved for a car loan. While we are more than happy to work with your bank or credit union, you can also take advantage of our buy-here-pay-here car loans.

What Is a Buy-Here-Pay-Here Car Loan?

A buy-here-pay-here car loan is a type of loan where we provide the vehicle financing. There are specific requirements to get approved, which include:

  • Provide proof of income, like recent pay stubs from your job.
  • Have a valid driver license.
  • Be a resident of Colorado.
  • Be at least 18 years old.


This type of loan is great when you have no credit or bad credit. You do not have to worry about being turned down as long as you meet our simple and easy qualifications. Plus, if you are a young driver, you can get a quality used vehicle without a cosigner!

man in new car

We will work with you to determine an appropriate payment plan, such as weekly, bi-weekly, or monthly payments and the overall length of time to buy the vehicle. Our goal is to help you find a vehicle with car payments you can easily afford and fit into your budget.

Once the vehicle is paid in full, we will turn the car title over to you. Or you can turn around, sell the vehicle back to us, and use our buy-here-pay-here financing to get a different vehicle.

To learn more about getting an auto pawn lawn or our buy-here-pay-here car financing, please feel free to stop by your nearest Massa Auto Pawn and Sales location today or call us at 720.598.0081.

We also accept RVs, dirt bikes, scooters, ATVs, motorcycles, RVs, trailers, boats, jet skis, snowmobiles, and other vehicle types as collateral for your car pawn loan.


  1. https://coag.gov/press-room/press-releases/11-30-16