Auto equity loans: What they are and who they’re best for Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by providing you with financial calculators and interactive tools that provide original and impartial content, by enabling users to conduct studies and evaluate information for no cost – so that you can make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The products that are featured on this site come from companies who pay us. This compensation may impact how and when products are featured on this website, for example such things as the order in which they be listed within the categories of listing in the event that they are not permitted by law. Our mortgage home equity, mortgage and other products for home loans. This compensation, however, does have no impact on the information we provide, or the reviews appear on this website. We do not consider the universe of companies or financial deals that could be open to you. Xavier Lorenzo/Getty Images
3 minutes read. Published 15 November 2022
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Written by Bankrate Written by This article was generated using automation technology and thoroughly verified and edited by an editor from our editorial team. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to control their finances through providing precise, well-studied and well-researched data that breaks down complex topics into manageable bites. Written by Mark Kantrowtiz and reviewed by Nationally recognized expert on student financial aid Mark Kantrowitz is an expert on student financial aid as well as the FAFSA, 529 plans, scholarships educational tax benefits, as well as student loans. The Bankrate guarantee
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If you’re interested in getting the auto equity loan, check with your credit union or bank first. They may offer the loan, or may have a partner that they are able to connect you to.
Auto equity loan is different from. auto title loan A car title loan is a short-term loan that uses your vehicle as collateral. More often than not, cars title loans are more costly than auto equity loans. Contrary to this the auto equity loans often come with longer terms and less interest. The advantages from an auto equity loan A car equity loan comes with many advantages. Faster approvals. For those who have bad credit, an auto equity loan could mean an approval in a short time. Since you can utilize the equity in your car for collateral purposes, the bank can be sure that it is getting its funds back. Larger loans. Like any equity loan, the amount you can borrow is largely dependent on the amount of equity you have in your car. Someone with a $10,000 car and $5,000 in equity could be eligible for a $5,000 loan as an example however, someone with a less valuable car might not be able take out an loan at all. A low interest rate. The interest rate you pay for your car equity loan is directly connected to your credit score and how much you value your vehicle. This means that if your vehicle is valued at a high value and you have a good credit score, you could be able to get a good rate even if you have less than perfect credit. Drawbacks to an automobile equity loan There are also drawbacks to taking out one of these loan. The vehicle is the collateral. An auto equity loan makes use of your vehicle as collateral. If you don’t pay your loan in full, the lender could take over your car in order to recover the losses. Hard to find. Auto equity loans aren’t very common. If you’re looking to get an auto equity loan consider contacting your bank or credit union first. They may be able to provide the service, or they may have a partner they can help you connect with. What kind of auto equity loan is suitable for? A cash-back loan could be the right choice for you if you fulfill the following: You have equity in your car. The most crucial aspect of being a suitable candidate of the auto equity loan is having enough equity to take a loan out against. You can afford installments. Because your car is on the line so it’s crucial to ensure that you’ll be able to afford payments each month. If you don’t then your car could be repossessed. This could be a issue if you require the car on a daily basis. Rates of interest could be lower than the rates you’re currently paying. If the interest rates of an automobile equity loan are lower than traditional personal loans and various credit alternatives, it may make sense to opt for this unique loan instead of something more readily available. Alternatives to car equity loan If you aren’t able to get an auto equity loan or when the process of applying isn’t going as smoothly as you’d like, then you may want to consider loan options that don’t require the use of your vehicle. Home equity Much like the auto equity loan it is based on you having equity in your home. It is typical to be able to borrow up to a percentage of the equity you have or a set amount. When you are the owner of your own home you could consider this a viable alternative. Personal loan Personal loans are a solid alternative to an equity loan However, the rates could be a bit higher since they aren’t secured. The procedure for applying for a personal loan is similar to the process of obtaining an auto loan and can be made in person or via the internet with various lenders. Credit cards While they are an alternative, are usually significantly more costly than an individual loan or secured loan. They are, however, more affordable to get and you could have instant access to the credit upon acceptance. The next steps A car equity loan is a great idea if you’re the market for a loan at a low rate. However, it is important to plan your budget in advance, since your car could be at risk if cannot pay the loan. Learn more
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Written by This article was produced using automated technology, that was then thoroughly edited and checked by an editor on our editorial staff. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances by providing clear, well-researched information that breaks down complex topics into manageable bites.
Auto loans editor
Review by Mark Kantrowtiz by Nationally known expert in student financial aid Mark Kantrowitz is an expert on student financial aid, the FAFSA and scholarships, 529 plans as well as tax benefits for education along with student loans.
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