Car equity title loans seem like a sound financial choice when you are looking for immediate cash and don’t have a friend who can grant you a quick loan. It’s a choice you can make even when you don’t have a good credit score in your record. When you start considering this loan, then you should have an idea about its different aspects. The more you know about this loan, the better decision you can make.
How Does it Work?
A car equity loan is a secured loan kind as your car is used as collateral for the loan. It means that if you don’t pay back the loan amount, then the lender has full right to repossess your car, sell it to another person for handling his default risk. You can get a loan against your car equity. The market value of your vehicle is the primary factor determining your loan amount. The good thing is that you can get a loan for both your new and old car, as long as your old car holds some market value.
What is the Interest Rate on Car Title Equity Loan?
When it comes to interest rates, you can expect a better price when you have a good credit score. As it is a secured loan, therefore, a lender doesn’t charge a high-interest rate that usually happens with credit cards. You can negotiate a good deal with a lender when you have a good credit score and are looking for fast cash by borrowing against your car equity. Getting a car equity loan with bad credit is possible; however, in that case, a lender will charge APR of almost 36 percent when your credit score is below 640.
Car Title loan Vs. Car Equity Loan
Terms like car title loan and car equity loans are often used interchangeably, but there is some difference between both loans. A car title loan is like a payday loan, you get the loan against your car title and pay it back either with a short term or a lump-sum amount. On the other hand, the car equity loan is where you use your car equity and borrow against your car market value. You get longer terms with this loan as you need to pay off your loan within three to five years. A car title loan is not easy to manage while car equity repayment is manageable due to its longer terms and low-interest rate.
What are the benefits of Car equity loan?
Car Title Equity Loans are easy to access loan type as you can apply online and enjoy instant loan approval. Within a day or two, the loan amount is transferred into your account, and you can use it to handle your emergency cash needs.
What are Risk Factors of Car Equity Loan?
Like a home equity loan where your lender will repossess your home and sell it, a car equity loan is the same. There is a risk of repossession involved in the process. When you don’t pay back to the lender, he can sell your car as he holds your car title. Another risk that you can’t overlook is that your lender might report to the credit bureau in case of your non-payment. When you don’t pay back as required, then your credit score is at stake. So, damage to your credit is another risk you should consider while deciding whether to go for this option or not.