There are two basic categories that cover most loan types. These are secured and unsecured loans. An unsecured loan is one that is given solely on the basis of the borrower’s creditworthiness. Generally, a borrower must have high credit ratings to be approved for an unsecured loan. For a secured loan, the loan is protected by an asset or collateral of some kind. This must be an item the borrower has purchased. When an asset is used as collateral for a loan, a lien is placed on the item. It is usually easier for you to be approved for a secured loan than an unsecured loan, especially if you have bad credit.
If you are in a bind and need cash fast, you may use your car as collateral for a loan.
How does a car collateral loan work?
When you take a car collateral loan you use the title for your vehicle as a guarantee. The lender will allow you to borrow an amount based on the value of the car. When you take an auto collateral loan, you can still operate your vehicle as normal. Once you have settled your loan, the lender will return your title.
If you default on your loan, the lender will assume ownership of your vehicle. However, you can try to negotiate with your lender if you are unable to clear your debt in time. You might be able to have your loan duration lengthened but this usually means higher interest rates. You could also roll over the balance to a new loan, but that too has a downside, with new administrative fees, processing costs, and in most cases, a higher interest rate as well.
Can I qualify for a car collateral loan if my car is not yet fully paid off?
Once you have enough equity in your car, you can access an auto collateral loan. Some lenders are even willing to accommodate you if your original auto loan was accessed from another lender.
How much can I borrow with an auto collateral loan?
The amount of money you will be able to access using a car collateral loan will depend on the value of your car. You’ll have to bring your vehicle in for inspection after which the lender will make an offer based on their appraisal. Typically, lenders will allow you to borrow up to 50 percent of the vehicle’s worth. If your car loan is not settled, they will allow you to borrow a percentage of the amount of equity you have in the vehicle.
Does an auto collateral require a credit check?
You will not likely undergo a credit check when applying for a car collateral loan since you have a guarantee. This is why a car collateral loan is a good option if you have bad credit scores or existing debt.
Accessing a car collateral loan is fast, easy, and convenient. But, as with any other loan, there are risks, the most obvious of which is losing your vehicle. That is why you should do your research to find your best options and always pay keen attention to the terms and conditions before agreeing to any car collateral loan.
If you are in Burnaby or Surrey and need cash now, Instant Auto Loans can help. Our loans are short-term with straight-forward repayment terms. You can easily qualify and have your loan processed and approved in just 15 minutes. So, what are you waiting for? Apply now!