Get Fast Cash With Online Loans Using Your Car as Collateral

Have you ever been in a situation where you need cash quickly but don’t have good credit or other options? Using your car as collateral for an online loan can be a fast way to get money when you’re in a bind. In this comprehensive guide, we’ll cover everything you need to know about online loans with your car as collateral.

What Are Online Loans With Car as Collateral?

Also known as auto equity loans or auto title loans, these online loans allow you to borrow against the existing equity in your car. Equity is the current market value of your car minus any amount you still owe on your auto loan.

For example, if your car is worth $15,000 and you owe $5,000 still on your auto loan, you have $10,000 in equity. With an online car equity loan, you can leverage this equity to borrow up to a certain percentage of it. Each lender has its own loan-to-value ratio, but you may be able to borrow up to 50-125% of your car’s equity.

So in the example above, you might be able to get approved for a car equity loan of $5000 to $12,500 from an online lender. The lender places a lien on your car title during the loan term. Once you repay the loan in full the lien is removed.

When Are Online Car Equity Loans a Good Option?

There are a few instances when borrowing against your car equity could make sense:

• You need money quickly for an emergency expense
• You have significant equity built up in your car
• You have bad credit and can’t qualify for other financing options
• You want to consolidate high-interest debt into one lower monthly payment

Online car equity loans allow access to fast cash, usually depositing funds directly into your bank account within 24 hours or less. They are also easier to qualify for than unsecured loan options since your car secures the debt.

Pros and Cons of Online Car Equity Loans

Here are some key pros and cons to weigh when considering an online auto equity loan:

Pros

• Fast access to cash, often in 24 hours or less
• Can borrow up to 125% of your car’s equity
• Easy to qualify compared to unsecured loans
• Lower rates than unsecured loans or credit cards
• Can get longer terms up to 5 years

Cons

• Put your vehicle at risk if you default
• Rates and fees are still high, often over 10% APR
• Ongoing auto insurance required, raising costs
• Additional monthly payment to budget for
• Prepayment penalties may apply

As you can see, the speed and flexible terms make these loans appealing, but you need to ensure you can afford the payments. Defaulting could lead the lender to repossess your car.

What Credit Score is Needed?

Your credit score plays a role in loan approval and your interest rate but isn’t the only factor. Many online lenders only require a minimum credit score around 500-600 rather than the 670+ often needed for unsecured personal loans.

They place more emphasis on your equity and ability to repay the monthly payment. Still, the higher your score, the lower rate you can qualify for, so aim for the best score possible.

How Much Can You Borrow Against Your Car?

The amount you can borrow depends on several factors:

• Your vehicle equity – Lenders base loans off a percentage of this
• Your credit score and income
• The age and mileage of your car
• Your debt-to-income ratio
• Loan-to-value ratios set by the lender

Expect loan offers ranging from 25% to 125% of your available equity. So if you have $10,000 in equity, loan offers may range from $2,500 up to $12,500. Each lender is different, so shop around for your highest approval amount.

What is the Application Process for Online Car Equity Loans?

Applying for an online auto equity loan is simple and can often be done entirely online in minutes. Here are the basic steps:

1. Determine your vehicle’s current value using resources like Kelley Blue Book and subtract any amount you still owe. This gives your equity amount.

2. Check your credit score so you know what to expect for rates. Many lenders allow online prequalification as well.

3. Compare offers from multiple online lenders to find the best loan amounts, rates, and terms.

4. Select your lender and complete the online application. You’ll provide personal, employment, and financial information.

5. Submit your vehicle information and documentation of its value and your remaining loan balance if any.

6. E-sign loan documents and the lender can direct deposit funds into your bank account quickly.

Be sure to read all terms carefully and understand repayment requirements before accepting a loan offer.

What Interest Rates & Fees Apply?

Since these are secured loans, interest rates are lower than unsecured options. Here are some examples of what to expect:

• Interest rates: Typically start around 7-10% but may be 20%+ for borrowers with lower credit scores

• Origination fees: Can range from 1-5% of the total loan amount

• Late fees: Usually around 5% of the monthly payment or $15-25

• Prepayment penalties: Some lenders charge a penalty equal to a few months’ interest if you pay off early

Always factor rates, fees, and other costs into your budget to ensure you can afford the monthly payments. Defaulting leads to additional late fees and puts your vehicle at risk.

What is the Repayment Term Length?

Online car equity lenders often offer longer repayment term lengths than other short-term loans like payday loans or title loans. Typical terms include:

• 12 months
• 24 months
• 36 months
• 48 months
• 60 months

Longer terms mean lower monthly payments but greater interest costs over the life of the loan. Make sure to do the math and choose the shortest term you can afford.

Many lenders also don’t penalize early repayment of car equity loans. You can pay more each month or even pay off the full balance early with no prepayment penalty. Just check your loan contract.

How Do These Loans Impact Your Credit?

An online auto equity loan shows up on your credit report and can impact your credit score several ways:

• Initial loan application – Will result in a hard inquiry lowering scores briefly.
• New debt – Will increase your overall debt load, also potentially lowering scores.
• Additional monthly payment – Having another payment can worsen your debt-to-income ratio.
• Making on-time payments – This has a positive impact over time by improving your payment history.

To limit damage to your credit, only borrow what you can afford to repay on time each month. Aim to pay off the loan as fast as your budget allows.

Can Your Car Get Repossessed for Non-Payment?

Yes, failing to make your monthly payments can result in the online lender repossessing your car. Once you default, the repo process happens quickly since your car secures the debt.

Repossession has major consequences too. Your credit score will plummet, making future borrowing very difficult and expensive. You also lose your vehicle, still owe the past due amount, and may be liable for repo fees.

Be absolutely certain you can handle the additional monthly payment before getting an online car equity loan. Have a backup plan to cover payments if you face financial hardship.

Are There Alternatives to Balance Against Risks?

Online car equity loans do carry some risks like repossession. Before pursuing one, always consider if other options may be available, such as:

• Borrowing from family or friends
• Using a credit card with low intro APR
• Taking out a secured personal loan
• Getting a cash advance on your paycheck
• Using a 401k or home equity loan
• Taking out a small personal loan from your bank/credit union
• Doing a 0% balance transfer to consolidate other high-rate debts.

Don’t resort to car equity loans as a first option. Weigh the alternatives to find the right fit for your situation with the least risk.

Tips for Getting the Best Car Equity Loan Terms

Follow these tips when applying for an online auto equity loan:

• Shop around with multiple lenders to compare loan amounts and rates
• Improving your credit score can help you qualify for lower rates
• Put 20% or more down if you recently purchased the car to build equity faster
• Choose the shortest loan term you are comfortable with
• Read all terms carefully and have a loan offer reviewed before signing
• Avoid lenders charging excessive fees or prepayment penalties
• Make payments on-time each month to keep your car safe and avoid fees

Using these strategies can help you secure the best loan offer and avoid common and costly pitfalls.

Are Online Car Equity Loans the Right Choice?

While borrowing against your car equity can provide fast access to funds, it also puts your vehicle at risk. Thoroughly weigh all alternatives before moving forward. These loans should only be used as a last resort option if you