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Don’t let your credit score stop you from getting cash when you need it
Unexpected financial emergencies happen. Medical expenses come out of nowhere. Your vehicle breaks down. The rent is due and your bank account is looking mighty bare.
The thing is…
You might have access to money right now — right there in your driveway.
Auto collateral loans allow you to tap into the value of your car and get the cash you need. And with over 100 million Americans having an auto loan outstanding, that’s a lot of people in need of vehicle financing.
In this post we’ll cover:
- What are auto collateral loans?
- The auto collateral loans process explained
- 3 things you should know about auto collateral loans
- Key things to consider before applying for auto collateral loans
What Are Auto Collateral Loans?
Auto collateral loans work on a simple principle.
Put up your vehicle as collateral against a loan. The lender files a lien on your car title while you continue driving it. Once you pay off the loan, they release the lien and you’re the car’s undisputed owner once more.
Simple, right?
These loans are also referred to as:
But they all mean the same thing – you’re using your vehicle’s value as your source of borrowing power.
How The Auto Collateral Loans Process Works
Here’s the best part about auto collateral loans…
They’re fast and easy. Most people are able to get an auto collateral loan in just a few hours. The auto collateral loans process is fairly straight forward and involves just a few steps that anyone can complete.
Let’s break it down:
Step 1: Check If You Qualify
Not much is needed here:
- Vehicle you own outright (or at least most of it)
- Valid government-issued ID
Most lenders also don’t run credit checks. They’re more interested in the car’s value than your credit score.
Step 2: Get Your Car Appraised
The lender assesses your vehicle to determine its value. Lenders look for things like:
The amount you can borrow will typically be between 25% to 50% of your car’s value. Some lenders will go higher depending on your situation and the vehicle itself.
Step 3: Submit Your Application
Fill out the forms. This is where it can get easier – most lenders keep the application process super simple. You can often apply for an auto collateral loan online or in person. The application form asks for some basic info on you and your vehicle.
Step 4: Review and Sign
Read the loan terms carefully. Make sure you understand:
Step 5: Get Your Cash
Approved? Great, you get the money. Many lenders offer same-day funding. You walk away with cash in your hand and get to keep driving your vehicle.
That’s it. It really is that easy.
3 Things You Should Know About Auto Collateral Loans
There are several major advantages that have made these loans popular in emergency situations.
Speedy Approval
Bank loans take weeks. Auto collateral loans? Hours or days at most. When you need cash fast, speed is essential.
No Credit Check
Bad credit? Not an issue. The loan is secured by your vehicle. As long as the lender is happy with your car’s value, your credit history is irrelevant.
In fact, around 2 million individuals leveraged their car title against a loan in the past year alone, highlighting how accessible these options are for those who can’t qualify with traditional lenders.
Keep Driving Your Vehicle
Sell your vehicle? Nope, just borrow against its value. You need your car to get to work, right? Auto collateral loans allow you to keep using your vehicle throughout the loan period.
Flexible Loan Amounts
Borrow what you need. The loan amount is based on your vehicle’s value. Whether it’s a few hundred or a few thousand, the loan size adjusts based on your car and your financial needs.
3 Key Things To Consider Before Applying
Hold up now, before you dash off and get one of these loans, there are a couple of factors to consider.
Interest Rates Vary
Auto collateral loans have higher interest rates than traditional loans. Why? They’re short term and higher risk for the lender.
Make sure you can comfortably afford the payments before taking one out.
Possibility Of Repossession
This is the big one…
If you miss payments, the lender can repossess your vehicle. This is the trade-off for getting access to cash without a credit check.
Only borrow what you know you can realistically repay.
Loan Terms Matter
Shorter loan terms = higher monthly payments but less interest overall. Longer terms = smaller monthly payments but more interest paid in the long term.
Choose the balance that fits your budget.
Regulations Vary By State
States have differing regulations on auto collateral loans. Some states outright ban them. Some cap interest rates and loan terms. Be aware of the regulations in your state.
Weighing The Pros And Cons
Auto collateral loans are no silver bullet. They can solve immediate financial needs, but there are also some risks.
They are an ideal solution when you:
- Own your vehicle outright
- Can afford the monthly payments
- Have a plan to repay the loan
Auto collateral loans may not be ideal if:
- You can qualify for a traditional bank loan
- You’re already in financial hardship
- You cannot risk losing your vehicle
- You have other borrowing options available
Assess your personal situation. What are your other options? Can you wait for a traditional loan? Do you have other assets that can be borrowed against?
Choosing A Lender
Different auto collateral loan providers are not equal. Do your due diligence.
Look for lenders who:
- Have transparent terms and conditions
- Offer competitive interest rates
- Provide flexible repayment options
- Are licensed to operate in your state
Compare multiple lenders before deciding. Research them online. Ask questions. Legitimate lenders will happily explain their process and answer any questions you have.
The Bottom Line On Auto Collateral Loans
Auto collateral loans offer a fast way to get cash using your vehicle as security. The auto collateral loans process is simple. Most people are able to go from application to withdrawal in a single day.
Auto collateral loans solve a real need. They give you cash when you need it immediately and traditional lenders won’t. You can keep driving your car throughout the loan period.
However be 100% clear on what you’re getting into. Read the terms carefully. Know the math. Be confident that you can comfortably afford the monthly payments. And only borrow the amount you actually need.
Auto collateral loans can be a valuable financial resource during emergencies. They are a good solution when you need money fast, own your vehicle outright and have no other borrowing options. But like any borrowing, they should be treated with care.
