A Auto Equity Loan lets you borrow money based upon the current value of your vehicle. Some lenders advertise that you can borrow up to 125% from your car’s equity over a period of up to seven years. The lender will charge interest and fees in addition to the amount borrowed. The lender could take your car if you fail to make your payments.
Auto title loan or Auto Equity Loan
Both loans can be used to finance your vehicle. The rates for auto equity loans are typically lower and have a longer term. airdog auto title loans, on the other hand, are usually for shorter terms (e.g., a month) and have higher rates. According to the Consumer Financial Protection Bureau, 20% of auto title loan applicants had their vehicles repossessed in 2016. Consider getting an auto equity loan to borrow against your vehicle equity. You can pay it off early and use the equity as a short-term loan.
Is an auto equity loan a good option?
An auto equity loan is a better option than a personal loan, autoporta title loan or payday loan. APRs for an auto equity loan are typically lower than those of an unsecured loan. An auto equity loan is one that requires you to have equity in your vehicle and the ability to make the monthly payments.
How to get an Auto Equity Loan?
Calculate your car equity. Use an industry guide such as Edmunds or Kelley Blue Book to determine how much your car is worth. If your vehicle isn’t yours, subtract the amount you owe from its value.
Compare lenders. Compare lenders. Credit unions are likely to offer the lowest rates for an auto equity loan than banks, but we recommend you still shop around.
Accept and apply. Accept the best offer from each lender. Multiple lenders won’t harm your credit as long as they are applied to within the two week window that allows rate shopping by credit bureaus.
The pros and cons of an automobile equity loan
- Pros
Lower APR. An auto equity loan can be a type secured loan so you may qualify for a lower interest rate than an unsecured loan such as personal loans or credit cards.
There are many repayment options. A short-term or long-term auto equity loan can be available depending on your needs and the lender’s offer.
Easy to qualify. An auto equity loan is possible if you are the sole owner or the legal guardian of a vehicle with positive equity.
Cash in a matter of minutes. This process can be completed in as little as one day. It is quicker than other types of loans such as a home equity loan that can take up to four weeks.
- Cons
Possibility of car repossession You could lose your vehicle if you default on your payments. This could be particularly devastating if your car is used to commute to work.
More debt. It is important to budget and balance your debts. It can be difficult to manage your payments if you have a car loan and a car equity loan. Here are some tips to help you reduce your debt.
Car insurance must be full coverage. When you take out a loan, lenders require you to have full coverage on your car. This could lead to higher monthly insurance costs.
Alternatives to auto equity loan
- These are some options and how they compare with auto equity loans.
- Refinance your car with cash-out
You may be eligible to cash-out your car loan and receive funds based on equity. You can only have one secured loan and one monthly payment.
- Auto title loans
We do not recommend auto electrician title loans. These loans have short terms and high interest rates. There is also a high chance of the lender repossession.
- Personal
Personal loans are granted based on credit history and credit scores only. Because the loan does not have collateral, lenders will typically require excellent credit. If you default on your payments, your car won’t be repossed but your credit score may be affected.
- Home Equity Loans
Home equity loans use your home as collateral, not your car. A home equity loan may offer a better rate than an auto equity loan because real estate appreciates and vehicles depreciate. However, not everyone can afford a home equity loan. If you default on your payments, there is still the possibility of repossession.
- Credit cards
Credit cards are available in many countries and offer unsecured borrowing. It is possible to have one already and feel tempted to make use of it instead of taking out a loan. You may be offered special deals or low rates when signing up for your first loan. For example, a 0% APR on your balance for one year. Others can charge as high as 20% or higher. Even if you make only the minimum monthly payment, the interest can quickly add up and become more costly than other types of mobile auto electrician.
- Side hustle
Instead of putting your car up for sale, you could make money from your car. You can make some extra income by using your vehicle in passive or active ways.
Sell or Trade in your Car
Either you can trade your vehicle in for a cheaper one and earn some cash, or you could sell your car. CarMax and other dealers will buy your vehicle without you having to buy it. A person could also buy your car from a dealer, rather than a company.