Collateral Loan Options for Drivers with Poor Credit

Are you applying for a loan?

Many Canadians have some confusion about the credit system. If you are one of these people, you might not secure a loan due to poor credit scores.

The good news is you have other alternatives when you need the money urgently. It applies as long as you have a vehicle.

How can you use your car to get a loan? Continue reading below for collateral loan options for drivers with bad credit.

The Car Title Loan

You can still secure a loan through a car title loan. It’s a short-term loan using your car as security for the loan. Applicants pledge their vehicle as collateral, and allows the lender to lend without relying on the borrower’s credit worthiness. It creates mutual respect between the borrower and lender, in that the borrower has the lender’s money and he lender has a lien on the borrower’s vehicle..

Car title loans in Toronto offer flexibility. Lenders accept applicants with other vehicle types like boats, motorcycles, and recreational vehicles as collateral.

Borrowers get a lump sum of cash in exchange for allowing the lender to place a lien on their vehicle. Lenders offer repayments in installments over a specific period. The good title loan lenders work with the borrower to make the payment amounts and length match their needs.

How Do Car Title Loans Work?

A car title loan is a secured loan with varying repayments between one and three years, however, the borrower can simply pay off the loan early if they want a shorter repayment period. Most lenders offer a loan amount matching up to 50% of your vehicle’s wholesale value.

Some borrowers may get more depending on the age and type of vehicle offered. The best part is that lenders don’t consider your low credit scores. The primary consideration of lenders is the value of your vehicle.

They first assess your car’s value to determine the amount they can lend. Most car title loans yield small amounts averaging between $1,000 and $10,000. In turn, your vehicle should have enough equity to qualify.

You and the lender will agree to a specific amount to be borrowed before the lender registerses a lien on your vehicle. The lien is a security interest to secure the title loan.

It’s a component of helping ensure you will cover the loan payments on time. In this case, the vehicle will serve as the security for the loan. Most good title loan companies will work tirelessly with you to help with any late payments. There are many times that there are valid reasons for late payments and a good title loan company will try and understand and recognize this.

Requirements for a Car Title Loan Application

Applicants must submit some requirements to qualify for the car title loan. Prepare your driver’s license and two valid IDs. They can be your birth certificate, health card, SIN card, or passport.

You can also use your citizenship/permanent resident card or other government-issued ID. Prepare your vehicle’s proof of ownership document. It should show the front and back of the whole ownership.

Keep your proof of insurance ready and any utility bill with the current date and your complete address.

If you can’t bring the vehicle to the lender, give eight photos instead. It should show various vehicle angles. Take pictures of the front interior, back interior, odometer, and the VIN or serial number. The lender will send you an email with the exact documents and pictures to send.

Prepare a pre-authorization form or void cheques too. You can send the documents in person or online. After assessing the documents and vehicle, the lender can approve within an hour.

Vital Considerations in a Car Title Loan

Some factors can complicate your loan application. What if your vehicle is still under another person’s name? You have no legal right to use the car as collateral if your name isn’t on the vehicle registration.

It applies even if you’ve been treating the car like it’s yours for many years. Thankfully, there’s a workaround to the problem. You can talk to the person whose name is on the registration and request him to co-sign your loan.

This legally allows the lender to take the vehicle as collateral. Co-signing will not affect the money you’ll receive. The only time the co-signer enters the picture is when you default your repayments and the co-signor is asked to pay themselves..

Another consideration is when you have a vehicle that’s registered under a company’s name. You can use the vehicle as collateral without any complications if you own the company that the vehicle is registered under. The lender will likely ask you to show the articles of incorporation as proof that you own the company.

New lenders also wonder if they have to give the vehicle to the lender. The short answer is no, you don’t need to surrender it. The lender doesn’t get any benefit from taking and holding the car.

It means you can still drive your car daily even if a lien is registered against it and it is being used as collateral. Take note that the loan has other minor chargessuch as lien registration fees.

Other Types of Collateral Loans

Other types of collateral loans are available for people with low credit scores.

You can apply for a collateral loan using classic cars, cash surrender value of life insurance policies, and other types of movable assets with value. Some lenders also accept homes as collateral when there’s already a firm closing date. In Ontario this process must be done through a licensed mortgage broker or lawyer.

Benefits of a Car Title Loan

Why should you consider applying for a car title loan? It’s an instant way of getting cash during emergencies. Evaluation is fast since you’ll get a decision from the lender in under an hour.

You do not need a good credit score to apply. All you need is your vehicle and the necessary documents. You also don’t need a third-party guarantor to secure the loan.

You can still use your vehicle during the term of the loan. If you’re using your car as a source of income, you can still make money that you can use to pay off your loan.

Secure a Loan Despite a Poor Credit Today!

Collateral loans allow you to get the money you need despite having a poor credit score. You can use your vehicle’s equity without surrendering the right to use it.

If you’re searching for a trusted lender in Ontario and the Greater Toronto Area, then you came to the right place.

We offer collateral loans with fast application processes. Connect with us today to discuss your options.