Understanding Vehicle Equity Loans

Do you need quick cash but you have a bad credit history? Traditional loans from credit unions or banks are not an option. Most lenders will not offer a loan to a high-risk borrower, and an unsecured one will charge high-interest rates. But you can still get a secured debt at a minimal interest rate even if you have bad credit by making use of your automobile as collateral and applying for a car equity loan.

Borrowers who are putting their vehicles up as collateral for equity loans will be able to borrow up to the value of your vehicle. The law enforces interest rate caps on small loans up to $2,500, but it is possible to borrow more than $2,500 if the vehicle that is used as collateral has sufficient value. In this case, lenders will usually charge you a higher interest rate. The state law structures car equity loans. Therefore, this will differ from state to state.

These loans are secured by the auto title, which means if the borrower fails to repay the loan, their vehicle may be repossessed and sold by the lending company. Equity loans are typically considered subprime because they mainly cater to people with low income, bad or credit and they usually have higher interest rates than conventional lenders.

How Car Equity Loans Work

The lenders may require performing a credit check or request proof of income. Typically bad credit is not a deal breaker when applying for vehicle equity loans. But the lenders have to ensure that the car will cover the cost of the debt, if the borrower default and won’t be able to make their payments. If this occurs, the lender will have to reclaim the car and sell the car to cover the costs and debts associated with it. This is why borrowers normally get an equity loan for up to 50% of the value of the car.

You must provide proof that you’re the owner of the vehicle when you apply for a car equity loan. Then the lender will evaluate the value of your vehicle by taking into consideration its wholesale price. The lender will then decide on the amount of that value, they can lend in cash. It’s usually around 50% of the vehicle’s value, but it will differ from lender to lender.

Finding a Reliable Lender

When you apply for a car title loan, ensure you find a reliable lender. You must avoid auto title loans lendersthat make use of bad lending practices that can lead borrowers into a cycle of debt which will also destroy their credit score.

A good lender will offer complete confidentiality and flexible payment terms. If you apply online, ensure you make use of a secure interface, where you can safely submit your personal information.

If you need of emergency cash, your car could be your major asset. An auto equity loan can get you the cash you need within a few hours of approval. You can use auto title loans to regain control of your finances and improve your credit score.