Benefits Of Auto Equity Loans
Although there are certain risks involved, there are several benefits of auto equity loans:
- Pay Lower interest rates: With a secured loan, your property is on the line. When the lender has collateral, you get a lower interest rate. If you go for an unsecured loan, you’ll end up paying higher interest rates
- Options for repayment: An auto equity loan is a very short term loan that ranges from 30 days to a few months. You can easily get the option for an extension on your loan terms. However, with an extension, be prepared to pay more fees
- Qualify for an auto equity loan: If you’re the owner of a car with a positive equity position, then you can qualify for this loan
- Easy cash option: The process to get cash will take one business day, which is less than any other loan. For example, home equity loans can take up to two to four weeks to get the cash
Drawbacks Of Auto Equity Loans
There are some drawbacks to these loans that should be aware of. These include:
- Nonpayment leads to losing your car: If you fail to make your payments, you can lose your car. If you rely on your car for work or other important travels, then this consequence can be tremendous
- Increased debt: Taking on debt for the long term isn’t always the best option. You can have liquidity in the short term, but it’ll be added to your overall debt load
- Prepayment penalties: Many lenders can charge you even if you’re repaying your loan early. Make sure to enquire about prepayment penalties
- Increased Insurance coverage: Many lenders will ask you to have collision car insurance if you’re planning to secure your loan with your car
- Negative remarks on your credit score: This loan will show as debt on your credit report, which can put a negative mark on your credit score
How Can You Get Auto Equity Loans?
If you’ve decided to apply for this loan, search for different lenders to get the best option. There are certain factors to keep in mind before getting one:
- Terms for different lenders may vary. Check properly before finalizing one
- Before taking the cash, take into consideration the different fees and repayment plans
- Be specific about the amount of cash you need. Many lenders will have minimum loan requirements and you may end up paying more than you need during your emergency
First, check with your local area banks and see if you can get this type of loan. Credit unions also offer these loans. The greatest benefit of taking a loan from a federal credit union is that the interest rates are fixed at 18%. You can also search for online lenders.
Auto Equity Loan Alternatives
Taking on this loan may not be the best solution to your financial crisis. Make sure to consider several other options such as:
- Auto title loans: Another way to get a secured loan is by getting an auto title loan. The lender will take the title of your car. These are short-term loans similar to payday loans. However, this can sink you more into debt. Many lenders set up your final payment for a maximum of 30 days, which can lead you to pay high fees and a high-interest rate of almost 300%. This means that even if you have bad credit, you can get a loan
- Refinancing your auto loan: Get cash quickly during your financial problem by refinancing your auto loan. A cashback auto loan can help by giving you the cash from the equity you have in the car. Before opting for such a loan, check if you can get a cashback auto financing loan that’ll reduce your interest rate. Additionally, your monthly payment will get reduced
Bottom Line
During emergencies, an auto equity loan can be a good short-term solution. Check with different loan options and cross-check with different lenders. Before selecting one, make sure to find the best auto equity loans that suit your needs. Keep in mind that you can risk losing collateral and credit if you don't make payments on time.
