Auto Loan 101: Exactly What Is an Auto Equity Loan? – Fast Action Finance
There are more than 35 million cars registered in Canada. That is a lot of people with a backup plan for getting emergency cash.
An auto equity loan (also known as a Car Title Loan) is a way for someone to get emergency funds by leveraging their car as an asset. It’s a less commonly known option for these types of situations. But it can be a great option to get out of a bind.
Let’s talk more about an auto equity loan and how it works.
What is an Auto Equity Loan (also known as a Car Title Loan)?
Unfortunately, sometimes things come up that we just can’t pay for. These can be really stressful times with seemingly no way out.
But an auto equity loan can give you that out.
This type of loan uses the value of a vehicle to secure the desired loan amount. Each car begins with a set monetary value, as it ages that value changes. How much the value changes depends on a variety of factors and set standards.
Once the car has been valued and a loan amount etablished, it can be used as collateral for a loan. This provides added security and allows the lender to lend without going through the credit evaluation exercizes and creates mutual respect between the borrower and lender.
An auto equity loan is often an easier loan to get because of this collateral. The application and approval process are typically much simpler.
Many find this type of loan to be a great option because they tend to have lower interest rates, longer terms, and are less risky.
How Does an Auto Equity Loan Work?
Like any type of loan, there is a process you have to go through before you can receive the money from an auto equity loan.
The process is very similar to applying for a regular loan but can be expedited and move very quickly. It can be really helpful to understand what is required before beginning the application. This way you are prepared and know what to expect.
Filing the Application
The first thing you will have to do is to fill out your application, which can be done online or in-person.
This application will require you to give basic, identifying information about you; name, address, contact information, and social security number. Obviously, the lender needs to verify you are a real person and have a way to communicate.
It will likely have you give your employment information as well. You’ll have to provide proof of pay, with paystubs or bank statements. If you are self employed this does not prevent you from getting an auto equity loan, as there is a different verification process to go through in this scenario
Next you’ll need to verify all of the information regarding the vehicle you’ll be borrowing against.
The lender will need proof of ownership for starters. Only the person whose name is on the title can receive money from an auto equity loan. It will also be required to verify the car is real through the VIN and other identifying information. If the vehicle is in a company’s name then proof of ownership of the compnay will be needed. If the vehicle is under more than one person’s name then there is a verification process to deal with too.
They will also need to see pictures of the car. This will allow them to evaluate the value of the car and decide on an appropriate loan amount. Every lender has different requirements for this, so check with them for specifics.
Once you have submitted all of the necessary documents and filled out the application, the lender will review it and decide if you are eligible or not.
Choosing Loan Amount
One of the most important parts of taking out an auto equity loan is deciding on the amount you’d like to take out.
It’s really important to be realistic about how much you really need compared to just what you could get. The two numbers will probably be very different. This is just an important thing to keep in mind.
Auto equity loans are much easier to get in many regards because the overall loan amount is often fairly low.
Most lenders in this field cap their possible amount at $25,000. This is mainly due to the value of cars not being extremely high.
Approval and Funding
As the lender looks through your application and submitted documents, they will be looking to see if you’re a good investment.
When a loan works like it should, everyone wins. You get the money upfront that you need, the lender makes money as you pay them back. But if anyone doesn’t fulfill their part, then everyone loses.
Lenders want to make sure they’re taking a smart risk loaning money to you.
So they will look at your stabilty to determine the likelihood of being paid back for the loan. They will examine the overall scheme of things to make this decision.
The approval process for an auto equity loan is often very quick. This is especially true when compared to other types of loans, like mortgages. This is because there is not as much risk involved for the lender, so less needs to be scrutinized in your history.
Once you are approved, a payment plan will be agreed upon and the money will be paid to you quickly. Then you are on your way!
Where to Get an Auto Equity Loan?
Auto equity loans are not given by banks, but rather from smaller private lenders.
They are also not available through credit unions. These institutions are generally more open to smaller loans and provide a more individual, personalized approach to banking, but they do not grant auto equity loans..
This type of loan is typically secured through an auto equity loan company. There are many options for this type of lender online, which makes the whole process very simple and convenient.
Finding the right lender will help you to get the best option for your personal situation.
Get the Cash You Need
No one expects or looks forward to needing extra money that they don’t have. Those are stressful and overwhelming times.
But there are options to help you get out of those situations. An auto equity loan can push you through the tough times and onto a better future.
If you’re ready to get started applying for an auto equity loan or need more information, contact us today!