When things go wrong, and you’ve already taken out an auto loan for your vehicle, 2nd lien title loans sometimes become necessary. Discover the intricacies, benefits, and risks of taking out a second lien on your vehicle.
What Is a Second Lien Title Loan?
A second lien title loan is when you take out a secondary loan using an already-liened vehicle as collateral. We may define a lien as a legal claim on an item of property when it has been used to secure payment of debt or as proof of an obligation.
In other words, if you have a primary loan or legal claim on the value of your vehicle (a lien), you can take out a secondary title loan.
When you have both a first and second lien loan in place, the first lien will always take priority in the case that you default on your loans, suffer asset liquidation, or declare bankruptcy. This rule makes second lien loans a higher-risk proposition for lenders.
There are several reasons why second lien title loans may be necessary, including the following:
- You require emergency funds, even though there’s already a lien on your car
- Your car is financed
- Lack of a clear vehicle title due to existing debts
Can You Get a 2nd Lien Title Loan if Your Car Is Financed?
Yes, you can take out a second lien on your financed car. However, it’s worth noting that this may not be a viable option in every state.
You may also need to authorize your new lender to buy over your existing vehicle financing debt so they become your primary lender. In this instance, while you are technically taking out a second lien, you’d be paying both liens to your new auto loan provider.
Alternatively, your new loan would be in addition to the initial loan from your financing agent. In this instance, the primary loan would take precedence if you default or declare bankruptcy.
Not every financing agent will be willing to sell off your principal debt or allow a second lien on the vehicle.
How To Qualify for a 2nd Lien Title Loan
Before looking for second lien title loans near you, it’s a good idea to familiarize yourself with the requirements. To qualify for this kind of loan, you need to provide the following:
- Vehicle equity greater than the value of your existing loan: Without a sufficient value, there isn’t any viable collateral for a second loan.
- Loan approval: You need approval from the first lienholder (your primary lender).
- Proof of income: Lenders need to confirm that you can repay any loan they give you).
- Proof of residency: You will need to provide proof of address to receive a loan).
- Photos of the vehicle: Especially when applying online, you will need to provide pictures to demonstrate the condition of the vehicle.
- Proof of insurance: While not true in all states and of all lenders, many auto lenders may require proof of vehicle insurance to ensure that they get their funds even if something happens to your car.
- Government-issued ID: Any reputable lender will need to confirm your identity before giving you a loan.
Apart from the standard specifications, namely having to prove your identity and ability to repay a loan, the only real requirement for a title loan is permission from your primary lender.
Where To Get Second Lien Title Loans Near You
When looking for 2nd lien title loans near you, one of the easiest ways to find one is through a middleman.
Online Loan Applications
Here at Titlelo, we work with a network of trusted, reputable lenders countrywide. This approach allows us to assist clients around the country, putting them in touch with lenders who can meet their needs.
Whether you’re in need of a first or second lien title loan, we can simplify the process. Simply complete our online application form, and one of our agents will contact you to discuss the details and ensure you have everything you need to apply for a title loan.
Once we’ve confirmed your eligibility and preparedness, we’ll connect you to a reliable lender.
Local Lenders
Your other option is to visit local lenders in person. While this has the advantage of being close by, you also need to be prepared and know what you’re looking for.
Before trusting a lender, you should ensure that they:
- Are a registered financial services provider
- Allow people to take out second lien title loans
- Have a good reputation, and don’t receive mainly negative reviews
- Offer the payment flexibility and loan repayment periods you need
- Give realistic interest rates
You may need to spend a fair bit of time doing research and phoning different lenders to find those who offer second lien loans and have a good reputation.
2nd Lien Title Loans vs Refinancing Your Existing Title Loan
If your car is still under financing, you have the option of refinancing, instead of taking a second lien. When refinancing, you’re essentially taking out a new loan to pay off the old loan but typically with improved terms.
You can accomplish this in one of two ways. Either you can refinance with your current lender, negotiating for better terms and more loan flexibility, or you can move your loan to a new lender. The new financial institution will buy your loan and offer you a new loan.
There are some potential benefits to refinancing your title loan, rather than taking a second lien, including:
- Lower interest rates: When renegotiating your loan terms on a refinancing agreement, you often get lower interest rates.
- Longer repayment periods: In many cases, a refinanced loan agreement will allow you to pay off the loan over a longer period than your initial loan agreement.
- Obtain additional funds: Depending on the available vehicle equity and your financial condition, you may be able to negotiate a larger loan when refinancing.
If you have the option to refinance, it’s often a brilliant solution to short-term financial struggles. Taking out a second lien title loan gives you a cash infusion, but the interest rates are generally higher, and these loans typically have shorter repayment terms.
Can You Get Multiple Title Loans at the Same Time?
Yes, you can have multiple title loans at the same time, if you have more than one titled vehicle. In this scenario, you can have a second title loan on the second vehicle.
As long as you have sufficient income, and your car has enough equity, your chances are good of getting a second title loan. It is worth noting, however, that second liens are not legal in all US states.
It’s also worth considering that you can’t take out two title loans on the same car. You can potentially refinance your existing title loan, but not take out a second one.
Risks of Taking Out a Second Lien Title Loan
When you take out a second lien title loan, the potential risks include the following:
Repossession
When you use your property as collateral for any loan, there’s always the risk of repossession if you fail to make payments. In the case of a second lien loan, you proportionately increase the likelihood of repossession since two lenders have a legal claim on your property.
Increased Burden of Debt
Whenever you take on an additional loan, you increase your burden of debt. In other words, you add more payments that you need to make with the same amount of income. When taking out loans, you need to consider not only the value of the principal but also the interest rates.
Having multiple loans, or loan stacking, quickly increases the amount of interest you need to pay.
Double Lien Complications
Having two liens is often a complex proposition. From getting your primary lender to approve your second loan to maintaining the payments on two different loans, there are many moving parts to consider.
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FAQs
Can I get a 2nd title loan online?
Yes, you can. Many lenders, including Titlelo’s network, have online application forms that you can complete. You will need to provide the required documentation and complete the form correctly. In some cases, you’ll be able to complete most of the process digitally.
Do I need to pay off my first loan before applying for a second?
It depends on the situation. If you have two vehicles, you can easily take out a title loan on each vehicle. In the case of vehicle financing with an auto loan, you can often get a second lien loan before you’ve finished repaying the auto loan.
How much can I borrow with a second lien?
It depends on the value of the vehicle, and the amount of equity on it. The potential loan size is limited by the available collateral.
What if my state doesn’t allow second liens?
If you can’t legally get a second lien in your state, consider refinancing. This approach allows you to get more money and better terms without placing a second lien on your vehicle. Instead, you refinance your vehicle and renegotiate the terms.
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. Chad’s 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 he’s not charting new horizons in the business world, Chad enjoys quality time outdoors with his wife and kids, as long as the Texas weather doesn’t hit a scorching 110 degrees! 