Payday car title loans are very much the same as payday loans except that here, the borrower is required to use his or her car as collateral for the money borrowed.

This particular type of payday loan is not yet as popular as regular payday loans. Possibly, this is because there is a lot of negative press surrounding this type of loan. Critics say that car title loans are even harsher than regular payday loans. If regular payday loans translate to very high interest rates, car title loans may mean even worse because the lender can take away the borrower's car if he or she fails to make the payment on time. To ensure that this is possible, lending agencies require that the borrower leaves a spare set of car keys with them. Once the car has been claimed by the agency, due to non-payment, the lending agencies earn the right to sell the car. Profits will solely go to the lending agency, even if the total amount is much more than what the client has borrowed.

Another downside of car title loans is that the amount of money that can be borrowed is not really that big considering the collateral required of the borrower. Loan amounts are typically less than 50% of the car's total value.

Car title loans also present the same pressure that payday loans do. In most cases, borrowers are not able to pay on time so they choose to refinance their loans. This means that interest rates would go up. In the end, the borrower may be forced to pay much higher amounts than what he or she has actually borrowed in fear of losing his or her car.

Because of the several disadvantages of car title loans, other forms of secured loans are being suggested. An example would be a title loan that is relatively less harsh than car title loans. Here, if the borrower fails to make the payment on time, the vehicle will only go to the possession of the lender. The lender still cannot sell it. The borrower is given another chance to pay back the money he or she borrowed and the interest rates, which will include the regular flat rates plus the repossession fee.