An equity car loan is a secured loan which allows people to borrow cash by making use of their car title as collateral. The major factors to consider when you want to determine the amount of cash you can borrow against your vehicle title are the lending company that you choose and the value of a car.
Within the title loan industry, most lending firm will only lend up to a particular percentage of the car’s value in cash. This is because they need to cover the sale of the vehicle in case you default on the payments and to cover the cost of repossession. You must determine the value of your car by making use of online resources such as Kelly’s Blue Book, so that you can get the full loan amount for your vehicle.
There are many different lending companies throughout the country. These lenders differ between the policies that determine how much a borrower can get. Typically lenders will approve an amount close to 50% of the value of their car. Some set a limit at approving 25-33% percent, while a few lenders will approve up to 100%. It’s very risky for the lender to grant a title loan for 100% of a car’s value, and you need to know that they will pass on some of that risk to you which will be in the form of fees and higher interest rates.
Car equity loans are not regularly recommended by consumer groups because of their restrictive contracts used by some lending companies and higher interest rates. If you don’t use these loans responsibly or read the fine print, you can get into a debt trap that is very difficult to break out of. Before you sign the contract make sure you read the agreement and check the legal disclosures section to understand the terms and condition, interest rates, additional fees, and the impact that all these charges will have on your finances.
Learn about what will happens at the end of the term. If you’re not paying a percentage of the principal with every installment, you may still owe the whole amount you borrowed even after the term is over and have to roll over the debt into a new agreement with higher interest rates or pay a balloon payment. Multiple rollovers can result in you paying multiple interest rates that increase the risk of you defaulting on payments and losing your car. Read the agreement to find out how much you need to pay and when you must make the payment.
You should make paymentswithout failure and based on schedule. Some loan contracts allow the lender to repossess the vehicle quickly in the case of a borrower missing a payment. Lenders will make use of all kinds of ways to safeguard their investment, ranging from adding good intention clauses to your agreement to ensure that you do not file for bankruptcy.
They may ask that you provide them with a duplicate set of keys so they can repossess the vehicle. Some lenders may go as far as installing a GPS system to track down and turn off the vehicle when they need to repossess it. Some loan contracthas clauses that stop you from taking legal action after your vehicle has been repossessed.
Equity car loan companies are doing you a good favor by providing the cash you need to sort out all emergency expenses. Be careful of companies that do not have your best interest in mind. Understand your rights as a consumer and make use of them.