![]() ![]() They’re not widely available: You may have a tough time finding a lender for an automobile equity loan.You can potentially lose your car: Because these are secured loans and your car serves as collateral, you can lose your car if you fall behind on payments or default on your loan.You will have two loans to pay, manage and keep track of. It can mean working with multiple lenders: If you get an auto equity loan from a different lender than your primary lender (if you’re still paying off the car), it can complicate things.You don’t need to be a homeowner: The other type of equity-based loan is a home equity loan, but not everyone is a homeowner.Approvals may be easier: Again, since auto equity loans are less risky for lenders, it may be easier to get than an unsecured loan, which is based solely on your credit and financial standing.Because the collateral makes these loans less risky, lenders offer lower rates. Offer low rates: Auto equity loans are secured, which means your car serves as collateral and lenders can repossess it if you don’t pay.If you’re deciding between the two, we recommend you stick with auto equity loans. Auto equity loans, on the other hand, can be for several months or years just like with a traditional auto loan. For example, according to the Consumer Financial Protection Bureau, about 20% of auto title loan borrowers have their cars repossessed.Īuto title loans also tend to be short-term loans, typically a month or less. These high fees can make it difficult to meet your repayment obligations and cause the lender to seize your car. They charge very high rates, even on par with payday loans. However, auto title loans tend to be riskier. Lenders are also likely to require you to offer up your title as collateral until you repay either type of loan. You can sign up for autopay so you don’t miss a payment.īoth auto equity loans and auto title loans are loans based on the amount of equity you have in your car. Pay off your loan: If you’re approved, congratulations! Remember to make all your payments on time.They’ll also want to see the details of any auto loans you have so they can calculate and verify your equity. Apply for the loan: Aside from the normal details like your income and credit score, lenders will want to know the details of your car so they can establish its value.Your best bet is to check with local credit unions and your current auto loan lender (if you still have a loan). Find a lender: Auto equity loans aren’t that common, especially at big banks. ![]() To calculate your auto equity, subtract the remaining amount on your car loan from your car’s value (as determined by Kelley Blue Book or a similar resource). Make sure you have equity: If you don’t have any equity in your car, you won’t be eligible to get a car equity loan. ![]() While lenders may set their own rules for the application process, here are rough guidelines you can follow: Getting an auto equity loan is a bit different than applying for a personal loan.
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