If you need money, you have various options. If you have good credit and several assets, you have more methods for getting the cash you need.
Banks or credit unions might grant you unsecured loans. With these loans, you don’t put anything up as collateral. If you have excellent credit, you can usually get an unsecured loan with favorable terms, like a low-interest rate. If you have not-so-great credit, you might still get a loan offer, but with a higher interest rate.
You can also get a secured loan, where you use an asset as collateral. You might use a house, some jewelry, or your car. Maybe you need information regarding auto equity loans for bad credit. We will discuss those in the following article as we list a few car equity loan facts consumers should know.
Lenders Grant Car Equity Loans Based on Your Vehicle’s Current Value
When you get a car equity loan, you can approach a bank or credit union. They might do vehicle equity loans. You can also approach certain other lending entities. When you look at lenders, you should check their reputation. If they have plenty of positive feedback, they become more viable candidates.
Lenders who might grant you car equity loans offer you money when they assess your car’s current value. If you try getting money this way, you should notice the current value stipulation.
Maybe you bought your car brand-new for $35K. When you drive it off the lot, though, the value drops several thousand dollars right there. As you keep driving it, the value falls further and further. You’ll put more miles on the car, and maybe it sustains a few dings and dents as well.
When the lending entity assesses your car, they offer you money based on the vehicle’s current worth, not it’s worth when you first bought it. That will impact how much cash you can potentially get.
You Can Still Get A Car Equity Loan with Bad Credit
Earlier, we mentioned getting car equity loans with bad credit. You can do that in most instances. That is because getting car equity loans leverages a physical asset, your vehicle, in this case.
Even if you have less-than-great credit, banks, and other lending entities will more likely grant you a car equity loan because you have a physical asset you can leverage. It’s the same if you get a secured loan using your house.
The lender certainly looks at your credit, and if it’s not so great, they might not give you the best interest rate on your loan. You should not think a poor credit score automatically sinks your chances when you want a car equity loan, though. Provided you own the car, you can leverage that asset, so your credit score won’t be the sole determining factor when the lender makes its decision.
You Can Sometimes Leverage The Car and Get More than Its Value
In some instances, a lending entity may let you leverage your vehicle and get more than its current assessed value. They might let you borrow the car’s entire value plus an additional 25%, for instance.
Not all lending entities do that. If you find one that does, make sure to check out its reputation before moving forward. They may let you get more than the car’s current value, but if they do, they might charge you much more interest than many other lending entities.
Don’t let the money these lenders dangle in front of you blind you. If you can afford the higher interest rate and need the cash badly, you might still proceed. If the higher interest rate doesn’t sound good, don’t accept the loan’s terms. Try getting money through other means.
Auto Title Loans are Not Vehicle Equity Loans
Title loans and equity loans both involve cars, but they’re not identical. You should understand the differences if you get either one.
Generally, with auto equity loans, the lender will give you a longer payback term at a lower interest rate. By contrast, when you go with a title loan, you will pay a higher interest rate, and you must pay back the whole loan sooner.
You might have just a month for the total loan payback if you accept an auto title loan. If you get one, you should know you’ll have the money by the loan term’s end.
If you know you have a cash windfall coming your way in a week and you get a title loan for a month, that might work out fine. If you don’t know whether you will have the money in time, though, try some other loan structure or another money-raising option entirely.
You Can Shop Multiple Rates Without Harming Your Credit
When you approach banks, credit unions, or other lending entities, you might notice they do a hard pull to assess your credit score and eligibility. If you check out multiple loan options with several banks or other lenders, that might hurt your credit.
However, the credit bureaus that monitor your score grant you an amnesty if you do some loan shopping within a designated period. For instance, maybe you get rates from multiple lenders, and each one does a hard credit pull. If you get those rates within a two-week time window, that won’t hurt your credit.
This credit rate shopping caveat can help keep your score in an acceptable range. It might drop a little, but multiple hard pulls won’t devastate it. Also, you can build your score back up, so if it falls a bit, you should not panic. You can regain your former score by working at it over the next few months.
Car equity loans might make sense if you have a vehicle and it’s your best or most valuable asset. Remember that you must pay back the loan in the designated time, or you might lose the car if the lender gives a collections agency your information.
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