Secured Loans Using Your Vehicle as Collateral in 2023

When you need cash for an unexpected expense but have less-than-perfect credit, a secured loan using your car or truck as collateral can provide funds fast. With a vehicle as security for the loan lenders take on less risk so can offer affordable rates and flexible terms even to borrowers with challenged credit.

This guide covers key topics on using your car or truck to secure a personal loan:

• How auto collateral loans work
• Benefits over title loans
• Qualifying for approval
• Comparing lender options
• Loan amounts and terms
• Applying for funds
• Protecting your vehicle

Read on to learn how putting up your car or truck as collateral can help you get approved for the cash you need now through a secured vehicle loan.

How Do Auto Collateral Loans Work?

With an auto collateral loan, also called an auto equity loan, you use your car or truck as security for the funds borrowed The lender places a lien on the title and if you default, they can repossess and sell the vehicle to recoup their investment.

Your car doesn’t need to be fully paid off to qualify as collateral. The lender will assess its current value and allow you to borrow a percentage of that amount based on your creditworthiness.

Auto collateral loans have fixed rates and terms, making them a better option than predatory car title loans with triple-digit interest rates. Payments and fees are transparent upfront before you commit.

Key Benefits Over Risky Car Title Loans

Secured loans using your paid-off car as collateral provide many advantages over car title loans:

• Lower rates – Auto collateral loans have fixed rates starting in the mid-20% APR range versus over 300% for title loans.

• Longer terms – Repay auto collateral loans over 24 to 60 months versus 30 days for some title loans.

• Pay only interest owed – With title loans you risk surrendering your car if you can‚Äôt repay the full balance when due.

• Keep driving your car – You keep possession of your vehicle with an auto collateral loan. The lender can only repossess it if you default.

• Build credit – On-time payments are reported to credit bureaus to help build your credit score over time.

While not cheap, auto collateral loans are a better bet for your budget and won’t put your vehicle at immediate risk like title loan terms.

What’s Needed to Qualify for Approval?

Qualifying for an auto equity loan is easier than getting approved for an unsecured personal loan. You’ll typically need:

• A vehicle you own free and clear with valid registration and insurance

• Sufficient vehicle value to secure the loan amount sought

• Steady income sufficient to make the monthly payments

• A valid driver’s license and auto insurance

• Proof of income through paystubs or tax returns

Your credit score still factors in but minimum requirements may be lower than for unsecured loans. Having an old, paid-off car free of any existing liens makes approval easier.

Comparing Top Lenders for Vehicle Collateral Loans

National lenders like Regional Finance and LoanCenter offer competitive auto collateral loans. Here’s how they compare:

Regional Finance

• $2,500 to $12,000 loans with 24 to 60 month terms

• Rates from 24% to 36% APR

• Online pre-qualification and application

• 850+ branch locations across 17 states

LoanCenter

• $2,500 to $35,000 loans up to 72 months

• Interest rates from 5.99% to 35.99% APR

• Available in 32 states

• Local representatives assist with applications

While LoanCenter offers larger maximums, Regional Finance provides a lower starting rate. Both feature online tools to initiate the loan process.

What Loan Amounts and Terms Are Available?

The amount you can borrow depends on the value of your vehicle and your income level. Regional Finance offers:

• Loans ranging from $2,500 to $12,000

• Vehicle collateral required for loans above $2,500

• 24 to 60 month repayment terms

• Rates starting as low as 24% APR

With proof of sufficient income, you could potentially get a $10,000+ loan secured against a paid-off car worth over $15,000 for example.

How to Apply for a Secured Vehicle Loan

The easiest way to start is pre-qualifying online with a lender like Regional Finance or LoanCenter. You’ll provide details on:

• The vehicle to be used as collateral including year, make, model

• Your personal information – name, address, date of birth, Social Security number

• Your employment status and income sources

• Contact information

This soft credit check gives a preliminary loan amount and rate offer without impacting your credit score. To get approved funds, continue with a full application by:

• Gathering required documents like proof of income, registration, and insurance

• Completing application forms and disclosures

• Allowing a hard credit check

• Providing vehicle title showing no existing liens

Once approved, you’ll get a check for the loan proceeds, minus any origination fees financed.

Tips to Protect Your Vehicle Collateral

Once approved, be sure to:

• Maintain valid registration and insurance on your vehicle

• Keep up maintenance and avoid damage

• Don’t attempt to sell the vehicle without lender consent

• Make timely payments to avoid default and repossession

• Contact the lender immediately if you anticipate payment issues

As long as you uphold the loan terms, your vehicle remains protected and in your possession. Auto collateral loans allow you to leverage your car’s equity to get approved for funds fast while avoiding title loan risk.

Let’s Review Key Takeaways

Secured personal loans use your car or truck as collateral to help get approved for funds when your credit is less than perfect. They offer more affordable rates and flexible terms versus title loans. Pre-qualify online with lenders like Regional Finance and LoanCenter to see offered amounts, fees, and rates. Maintain your vehicle during the loan term and make payments on time to avoid default. Used wisely, auto collateral loans can provide fast access to cash using an asset you already own.