What You Need to Know
From time to time, we all run into a bit of trouble with money. Sometimes itâs an unexpected medical or home repair bill. For others, a natural disaster or injury may have put them out of work. Many small start-up companies have also been created with the aid of a short-term loan service.
Whatever the reason, an auto equity loan is one of the easiest ways to get the money that you need. Unlike traditional bank or personal loans, you donât have to wait days or even weeks to get approved. The only thing that you need is the title to a vehicle that you own, proof of income, and some basic personal information.
Many auto equity loan services can even give you your requested amount the very same day. This is great if youâre under pressure and canât afford a long wait time or approval process.
What Is A Auto Equity Loan?
Essentially, an auto equity loan is a loan which uses your personal vehicle as collateral. Most traditional lenders want to know your credit score, require you to have sufficient credit history, and will make you wait days to weeks while they await approval from an âunderwriterâ somewhere up the corporate ladder.
An auto equity loan essentially allows you to cut out all of the nonsense and long wait times. Instead of having to review your entire credit history with the lender and wait for approval, you simply present them with proof of income and proof of ownership of your vehicle.
After theyâve appraised your car, theyâll cut you a check or direct deposit the amount into your bank account.
How Do Auto Equity Loans Work?
Auto equity loans are given out based on the value of your car and ability to pay back the loan. Since youâll be using your vehicle as collateral, the lenders will start by appraising the dollar value of your car. Lenders usually turn to Kelly Blue Book to get an accurate evaluation. You will then be able to request a loan amount equal to or less than the value of your car.
After the loan is given, the lender will take your title and put a lien on it. In the eyes of the law, they are now the legal owners of your vehicle until you pay them back and they remove the lien. This means that if you stop making payments, they are legally allowed to take your vehicle and sell it at auction to get their money back.
Since weâre on the topic, itâs worth noting that this is usually a last resort measure. It takes then time and money to repossess and resell a car, so nine times out of ten they would much rather have your money.
That being said, if you ever run into a situation where youâre having trouble making payments, theyâll usually be able to work out a deal with you to lower your monthly payment amount instead of jumping straight into taking your car.
Another thing to keep in mind is that auto equity loans are designed to be short-term loans. The interest rate is usually higher than traditional bank loans, and the faster that you can pay back the loan, the lower the amount that youâll have to pay in interest fees and expenses.
Lender Requirements
The great thing about auto equity loans is that theyâre incredibly easy to apply for. As long as you own a vehicle with your name on the title and have proof of a job, youâll be able to qualify for a loan equal to or less than the value of your car. Hereâs what most lenders will require from their borrowers:
- Vehicle (in working order and with title in-hand)
- Insurance and valid plates on the vehicle
- Your personal information (license, social security)
- Proof of income
Comparing the Alternatives
If youâre in need of some quick cash and you need to borrow some money, you have quite a few options. There are payday loans, bank loans, personal loans, and ultra short-term title loans. In general, auto equity loans are a little bit safer than title loans (who tend to have even higher interest rates).
Auto equity loans are also a lot easier to obtain than traditional loans. It doesnât matter if you have bad credit or no credit. As long as you own a vehicle and have a job, youâre approved.
Auto Equity Loan Laws
When short-term title loans and auto equity loans first came on the scene, there were a lot of predatory lenders who would lend huge amounts to people who had no way of paying them back. In an effort to reduce this, many states started to regulate who lenders were allowed to lend to, and how much they could lend. Here are some of the legal regulations that may apply in your particular state:
- Limits on APR and fixed interest rates
- Some states donât allow military to take out title loans
- All borrowers must be at least 18 years of age
- Borrowers must be U.S. citizens
Depending on where you live, you may have more or less laws regulating auto equity loans. To be sure whether you qualify, check your stateâs individual lending laws.
Conclusion
If you need some quick cash and you have a way to pay back the amount borrowed, an auto equity loan is a great way to get the money that you need without having to deal with long approval times and extensive credit/background checks. If youâve got a job and a working car in your name, then you can get a loan!
References
âWhat is an Auto Equity Loan and How Do You Get One?â, Lending Times, 2017,
https://lending-times.com/2017/03/30/what-is-an-auto-equity-loan-and-how-do-you-get-one/
Chad is a seasoned executive with an impressive track record spanning over two decades in the Fintech sector across diverse technologies and financial industries. With a wealth of knowledge accumulated throughout his career in finance & technology, he is dedicated to ensuring that both our employees and clients benefit from the highest levels of expertise and an unwavering commitment to customer service. Chadâs forward-looking approach and exceptional leadership skills have played a pivotal role in the success of his businesses, empowering consumers to proactively navigate the ever-evolving challenges of everyday life. When heâs not charting new horizons in the business world, Chad enjoys quality time outdoors with his wife and kids, as long as the Texas weather doesnât hit a scorching 110 degrees! đ