A financial emergency can strike at any time in our life, and you may suddenly find that you need an abundance of cash quickly. Unfortunately, expenses can come out of anywhere that we just cannot afford right away. Unfortunately, not everyone is able to get through these situations without borrowing money. If you don’t have an emergency fund, what do you do when you get hit by an unexpected medical bill or your car breaks down? Don’t lose your heart! You can go for car collateral loans which help you cover up your unexpected financial needs.
What are car collateral loans?
Car collateral loans also called as car title loans are a fast and extremely highest way to get funds quickly, and people with bad credit can also apply for this loan. Collateral loans can be obtained by borrowing against other collateral other than cars such as truck, SUV, motorcycle, etc. People are especially fond of car collateral loans because they’re easy, often allow you to keep ownership of your vehicle while paying back your loan. You don’t require any credit checks and are based on your ability to repay the loan.
How do collateral loans work?
If the borrower fails to pay back the loan, they must put something of value as collateral. In this case, the item of value is your car which is used as collateral.
If the borrower defaults on the loan, the lender can take ownership of whatever was offered as collateral.
Why Should People Consider Getting a Car Collateral Loan?
Collateral loans are also called secured loans and such loans offer lower interest rates than unsecured loans. Because the lender has the assurance of getting something of value even if you can’t pay back your loan. This loan is helpful to people with bad credit, and to those who don’t have money to make down payments on traditional loans. So, if you are going through a bankruptcy or other financial crisis then this loan can help you overcome such circumstances in life.
The biggest advantage of car collateral loans is that they can be obtained extremely quickly, typically within a few hours of first.
Requirements needed for Car Collateral Loans:
There are few documents required so that you can get approved as quickly as possible.
- The original vehicle title showing the ownership
- A government-issued identification
- proof of residency
- Your current vehicle registration
- Proof of vehicle insurance
Here’s what happens when you use your car as collateral:
- A car title loan is a secured loan which is based on the value of your car and the amount that you can get depends on the equity in your vehicle and your ability to repay the loan.
- Equity is evaluated based on factors such as the mileage of the car, market value and condition. Your car’s model, make and year of manufacturing also play a vital role in determining the loan amount.
- A lien is added to your car title if you choose to take a car title loan. You don’t have to fear about losing your car as you can still drive it while making the monthly payments. After the loan is paid in full, the lien is removed from your title.
Poor Credit is not an obstacle!
It is quite obvious that you can be stressed out when you are in need of urgent money and you get rejected due to your poor credit score. Not everyone has a good credit score. As a result, they can have a problem in qualifying for traditional bank loans. Car collateral loans are made for such people who do not have a good credit score.
There are some advantages and Disadvantages to Car Collateral Loan:
Advantages
- Collateral loans are easily obtained when compared to other traditional bank loans. They come with very minimal requirements that are needed for loan approval. because the lender doesn’t have to worry that they will be left with nothing if the borrower defaults on their loan.
- With collateral loans, bad credit doesn’t stand in your way of obtaining money. You usually don’t require a credit check when you go for this loan.
- This loan can often be received within a couple of minutes, making it both a fast and convenient way to get quick access to cash
Disadvantages-
- Your car is being used as security for the loan.
- If the recipient defaults on their payments, then there is a risk of your car being possessed by the loan company.
