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 mission is to help you make better financial decisions by providing you with interactive tools and financial calculators that provide original and impartial content. We also allow users to conduct research and compare data for free to help you make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The products that are featured on this site are from companies that pay us. This compensation may impact how and where products appear on the site, such as 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. This applies to our mortgage, home equity and other products for home loans. This compensation, however, does affect the information we provide, or the reviews that you read on this site. We do not consider the entire universe of businesses or financial offers that may be accessible to you. Xavier Lorenzo/Getty Images
3 minutes read. Published November 15, 2022
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Written by Bankrate Written by This article was generated using automation technology and thoroughly checked and edited by an editor on our editorial staff. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping readers gain confidence to manage their finances. They provide precise, well-studied and well-researched data that dissects complicated topics into digestible pieces. Written by Mark Kantrowtiz and reviewed by Nationally acknowledged expert on student financial aid Mark Kantrowitz is an expert on student financial aid including the FAFSA and scholarships, 529 plans, education tax benefits along with student loans. The Bankrate promises
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You have money questions. Bankrate can help. Our experts have helped you understand your money for more than four decades. We strive to continuously provide consumers with the expert advice and tools required to succeed throughout life’s financial journey. Bankrate follows a strict policy, which means you can be confident that our content is honest and precise. Our award-winning editors and journalists produce honest and reliable content that will help you make the best financial decisions. The content we create by our editorial staff is objective, truthful and uninfluenced from our advertising. We’re transparent about the ways we’re able to bring quality content, competitive rates, and useful tools for you , by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the promotion of sponsored goods or services, or through you clicking certain links posted on our site. Therefore, this compensation may influence the manner, place and in what order items appear within listing categories, except where prohibited by law. This is the case for our mortgage or home equity products, as well as other home loan products. Other elements, such as our own website rules and whether a product is available in your region or within your personal credit score could also affect how and where products appear on this site. We strive to offer a wide range offers, Bankrate does not include details about every financial or credit product or service. A lets you borrow money without any security -for instance, by taking out an auto equity loan it is possible to borrow cash against the value of your vehicle. Although having a car can result in a lower interest rate, you will need to consider the advantages and risks that come from an auto equity loan before taking one out. What an automobile equity loan is? An Auto equity loan is a variation on an . You can use the funds for any purposeas long as there’s equity in your vehicle. Auto equity loans let you borrow money against the value of your vehicle. If your car is worth $25k and has a loan balance of $10,000, you’ll have $15,000 worth of equity that could be used to use to borrow against. If you take out an auto equity loan you are able to borrow as much as 100 percent equity you have in your vehicle, subject to a specified limit. Since the loan will be secured with your vehicle, it’s likely you will be able to get a lower rate than the typical personal loan. However, because your car will be used as collateral, it is at risk of being taken away should you not keep your payments in time. Bankrate tip
If you’re interested in getting an auto equity loan first, contact your bank or credit union first. They may offer the loan, or might have a partner they can connect you with.
Auto equity loan is different from. car title loan A car title loan is short-term loan that relies on your vehicle as collateral. Most of the time the cars title loans are much more costly in comparison to car equity loans. Contrary to this the auto equity loans typically come with longer terms and lower interest rates. Advantages of the auto equity loan A car equity loan can come with numerous benefits. Faster approvals. For those who have bad credit, an auto equity loan can mean quick approval. Since you can use the equity of your car as collateral, the bank can be sure that it is getting its money back. More substantial loans. As with any equity loan the amount you can borrow is partially determined by the amount of equity you own in your vehicle. A car worth $10,000 and $5,000 in equity can get $5,000 loan as an example, while someone with a car that is less valuable may not be able to take out an loan in the first place. Low interest rates. The rate you get on an car equity loan is directly connected to your credit score and what you can expect to get for your car. If your car is valued high it is possible to obtain a great rate even with less than perfect credit. The drawbacks of the automobile equity loan There are also some drawbacks to taking out one of these loan. The vehicle is the collateral. A car equity loan uses your car as collateral. This means, if you do not make payments in full, the lender may take possession of your car to recover its loss. Hard to find. Auto equity loans aren’t often available. If you’re looking for an auto equity loan consider contacting your credit union or bank first. They might offer this service, or they may have a partner to connect you with. Which auto equity loan is suitable for? An auto equity loan may be right for you if you meet the following: You have equity in your car. The most important part of being a good applicant for car equity loan is having enough equity available to take a loan out against. It is possible to pay the monthly to make payments. Because your car is on the line, it’s important to know that you’ll be able to afford payments each month. If you fail to do so, your vehicle could be repossessed. This could be a issue if you require the car on a daily basis. Rates of interest could be less than what you’re currently paying. If the interest rates for an auto equity loan are less than traditional personal loans or various credit alternatives, it might be a good idea to choose this unusual loan type than something that is more easily accessible. Alternatives to an auto equity loan If you can’t get an auto equity loan or if the application process isn’t going as smoothly you would like, you might want to look into loan options that don’t require your vehicle. Home equity Much like the auto equity loan, a relies on you having equity in your house. It is typical to be able to take out loans up to a certain percentage of the equity or a fixed amount. If you own your own home, this may be a viable alternative. Personal loan Personal loans are a viable alternative to an auto equity loan, but the rates could be a little higher as they’re not secured. The process for taking out the personal loan is similar to that of obtaining one for an auto loan and is able to be completed online or in person using a variety of lenders. Credit cards, while they’re an option, they’re usually much more expensive than an individual loan or secured loan. However, they are also easier to qualify for and you could have instant access to credit after acceptance. The next steps A car equity loan could be a good option if you’re in seeking a loan with a low interest cost. However, it is important to plan your budget in advance, since your vehicle will be at risk if are unable to pay your loan. Learn more
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The article was written by produced using automated technology, and thoroughly edited and fact-checked by an editor on our editorial team. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to control their finances through providing clear, well-researched details that cut otherwise complicated topics into digestible pieces.
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Review by Mark Kantrowtiz by Nationally recognized expert on student financial aid Mark Kantrowitz is an expert on student financial aid, the FAFSA, 529 plans, scholarships educational tax benefits, along with student loans.
Nationally acknowledged expert in student financial aid
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