An auto equity loan is a loan that is secured using your car. Have you ever been feeling that your car could do more than just sit in the driveway? Perhaps you have urgent cash requirements, urgent bills, or home maintenance, or you simply need more breathing space.
Even if you own your car or have earned some equity in it, you can unlock that value without selling it. It is referred to as an auto equity loan, and, yes, you can apply for one over the Internet without setting foot on the floor of a bank or loan office.
Here’s how it works:
– You own a vehicle.
– The lender determines the value of the car.
– You borrow a percent of that value.
– You pay a standard amount of money with interest.
– You continue driving the car till you default.
Consider it as a loan secured by the car, not the credit score. That will make it available to a wide range of individuals who may fail to get normal loans.
Step-by-Step: How to Get an Auto Equity Loan Online
Step 1: Know Your Car’s Value
You should have an idea of the value of your car before applying. This will be used by lenders to determine the amount they can loan you.
Utilize reliable valuation tools such as
– Kelley Blue Book
– Edmunds
– NADA Guides
Pro Tip: Do not lie about the state of your car. Lenders will verify it.
Step 2: Check Your Equity
Equity refers to the difference between a car’s value and the debt you have on the car (in case there is any). For example:
– Car value: $12,000
– You owe: $4,000
– Your equity: $8,000
The majority of the lenders would allow you to borrow between 25 and 70 percent of the equity.
When your car is paid off in full, then you are in a better position.
Step 3: Research Online Lenders
You will want to get a lender who:
– Is licensed in your state
– Has clear terms
– Does not charge high charges.
– Includes actual reviews (not only on their own site)
Avoid lenders that:
– Don’t list a physical address.
– Ask for upfront fees
– Ensure guarantees no matter what is happening to you.
Step 4: Gather Your Documents
Online lenders will require:
– Documentation of earnings (paycheck, tax returns)
– Evidence of residence (utility bills, lease)
– Driver’s license
– Title of your vehicle (should be in your name)
– Photos of your car
– Proof of insurance
With these available, it will hasten the process.
Step 5: Submit Your Application
This section is typically straightforward. Fill out the online form with:
– Your personal info
– Details about the car
– Your income
In a few minutes you will have a pre-approval. The last approval can take several hours.
Step 6: Review the Terms Carefully
Read before signing anything:
– Interest rate (APR)
– Repayment schedule
– Late payment penalties
– What happens if you default?
Don’t skip this part. Other predatory lenders conceal the charges in the fine print.
Step 7: Sign and Receive Funds
Once you accept the offer:
– You may e-sign the agreement.
– The deposits are usually made in 1-2 business days.
– You go on with your car as usual.
All you have to do is to remember: the lender can repossess your vehicle in case you cease to make payments.
Read also | See How a Heter Iska Loan Works and When to Get It
The Online Advantage: Why Go Digital?
The advantages to taking out an auto equity loan online are as follows:
– Speed: Applications are made in minutes, not hours.
– No appointments: You do not have to stand in a queue or hold a meeting with a loan officer.
– Greater access: You will be able to compare a variety of lenders.
– Private: No embarrassing moments with your bank.
That does not mean it is risk-free though. Online lending is simpler; however, you must be more cautious of who you are dealing with. We will discuss how to identify credible lenders a bit further.
Online auto equity loans have risks
Let’s be real. This isn’t free money. It has real risks.
Risk 1: Losing Your Car
Failure to pay on time will make the lender take your car. This is not merely a threat—this is the agreement.
Risk 2: High Interest
People in tight spots are preyed on by some lenders. They give quick money, but they entomb you in interest.
Risk 3: Overborrowing
Borrowing more than you can manage may put you behind—and lose your car and your credit rating.
Smart Tips to Stay Safe
– Find out the comparison of at least three lenders.
– Do not get in debt beyond what you require.
– Use automatic payments so that due dates are not missed.
– Check online reviews but also run a search on the name of an online lender and keywords such as “scam” or “complaint.”
– Don’t send out your details to some sketchy websites.
See also | The Ultimate Guide to Car Insurance: Everything You Need to Know
Frequently Asked Questions
1. Will I be able to take an auto equity loan when my name is not on the title of the car?
No. The vehicle must be in your possession to secure it as collateral.
2. Do I require excellent credit to qualify?
No. There are several lenders who emphasize your income and car rather than your credit score.
3. Is a motorcycle or RV eligible as an auto equity loan?
Certain lenders will take motorcycles or RVs, but options are limited by state and lender.
4. Are cars used in auto equity loans limited to a mileage restriction?
Yes. There are lenders who will not accept vehicles that have travelled past 150,000 miles. Others go higher. Always check.
5. Will I be able to still receive an auto equity loan with an existing car loan?
Yes, so long as the value of your vehicle is more than the amount due. You will be borrowing on the leftover equity.
6. What would happen in the scenario where my car is destroyed in the course of the loan term?
In the case of full coverage, the lender will be paid by the insurance. Provided there is balance, you are liable.
7. Will I damage my credit by applying to an auto equity loan?
Other lenders conduct a soft credit check, which has no implication on your score. Others do a hard pull. Ask before applying.
Conclusion
An auto equity loan could be a clever approach to get quick cash particularly when you do not have the best credit. But it’s not free money. You are putting up your car as security, and with that comes actual responsibility.
Provided you only borrow what you require, you get a well-known lender, and you read the fine print, an auto equity loan can see you through a tight spot without damaging your finances.