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 goal is to help you make better financial choices by offering interactive tools and financial calculators, publishing original and objective content. We also allow users to conduct research and compare data for free and help you make sound financial decisions. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The products that are featured on this site come from companies who pay us. This compensation could affect how and when products are listed on this website, for example for instance, the order in which they may appear in the listing categories, except where prohibited by law. This applies to our mortgage, home equity and other products for home loans. But this compensation does have no impact on the information we publish, or the reviews that you read on this site. We do not consider the entire universe of businesses or financial deals that could be available to you. Xavier Lorenzo/Getty Images
3 min read Published November 15, 2022
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Written by Bankrate Written by Bankrate. This article was written by using automated technology. It was then thoroughly checked and edited 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 manage their finances by providing concise, well-studied information that dissects complex subjects into bite-sized pieces. Written by Mark Kantrowtiz and reviewed by Nationally well-known student financial aid expert Mark Kantrowitz is an expert on student financial aid as well as the FAFSA as well as scholarships, 529 plans, tax benefits for education and student loans. The Bankrate promises
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If you’re considering getting the auto equity loan make sure to contact your credit union or bank first. They may offer the option, or might have a partner they’re able to connect you with.
Auto equity loan vs. car title loan A car title loan is a short-term loan that relies on your vehicle as collateral. Most of the time the cars title loans are more costly than auto equity loans. In comparison the auto equity loans typically are longer-term and have low interest. Benefits associated with an auto equity loan An auto equity loan can come with numerous benefits. More rapid 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 of 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 partially determined by the amount of equity you have in your vehicle. A car worth $10,000 and equity of $5,000 could be eligible for a $5,000 loan for instance however, someone with a car that is less valuable might not be able to take out a loan in the first place. A low interest rate. The rate you get on your car equity loan is directly connected to your credit score as well as how much you value your car. That means if your car is valued at a high value and you have a good credit score, you could be able to obtain a great rate even with less than perfect credit. The drawbacks of the car equity loan There are also disadvantages of taking out the auto equity loan. The vehicle is the collateral. A car equity loan utilizes your vehicle as collateral. This means, if you don’t pay your loan the lender may take possession of your car to recover the losses. The loan is hard to come by. Auto equity loans aren’t often available. If you are looking to obtain an auto equity loan consider contacting your bank or credit union first. They may offer the service, or they may have a partner they can connect you with. Which car equity loan is ideal for? An auto equity loan could be the right choice for you if you meet the following criteria: You have an equity in your vehicle. The most crucial aspect of being a qualified candidate of the auto equity loan is having enough equity to make the loan out against. You can afford to make payments. Because your car is on the line, it’s important to know that you’ll be able to pay each month. If you do not make payments, your vehicle may be taken back. This could be a issue if you require the car on a daily basis. Rates of interest could be lower than what you’re currently paying. If the interest rates of an automobile equity loan are lower than conventional personal loans or other credit options, it might be a good idea to choose this unusual loan instead of something that’s more accessible. Alternatives to car equity loan If you’re unable to obtain an auto equity loan or if the application process isn’t going as smoothly as you’d like, then you might want to look into loan alternatives that don’t require your car. Home equity Like an auto equity loan, a relies on you having equity in your home. It is typical to be able to take out loans up to a certain percentage of the equity you have or a set amount. In the event that you have your own house it could be an option. Loans for personal use loan Personal loans are a solid alternative choice to an auto equity loan, but the rates could be higher because they aren’t secured. The procedure for taking out the personal loan is similar to that of getting one for an auto loan and can be made online or in person with a variety of lenders. Credit cards, while they’re an option, they are typically far more costly than the personal loan and secured loan. They are, however, more affordable to get and provide immediate access to the credit upon the approval. Next steps An auto equity loan is a great option if you’re in the market for an loan at a low cost. It is essential to plan your budget appropriately, because your car could be in danger if you cannot pay the loan. Learn more
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Written by This article was generated using automation technology that was then thoroughly edited and checked by an editor on our editorial team. 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 the confidence to take control of their finances with clear, well-researched information that breaks down complicated subjects into bite-sized pieces.
Auto loans editor
Reviewed by Mark K. Kantrowitz Reviewed by Nationally known expert in student financial aid Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as scholarships, 529 plans educational tax benefits, as well as student loans.
Nationally recognized student financial aid expert
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