People with financial problems can nowadays easily borrow loan up to 1000 dollars by giving their automobile as a collateral security for one of two short term loan options. These are commonly known as auto equity loans or title loans. People often confuse between the two and use it interchangeably. In reality they are not exactly same. There are few of the things which distinguish them, most important of it being the vehicle ownership. Let’s see the two terms –
Auto equity loans
This type of loan is for the people who don’t own the vehicle in the eyes of law that is- who are still making the payment on the vehicle. The legal holder is the majorly the bank that originally financed the car. Many times the holder may also be a credit union instead of the bank. Irrespective of all this, a person may be eligible for the equity loan if they have adequate equity in vehicle. The amount of needed equity for the eligibility of the loan may vary from lender to lender, but generally accepted rule is that a person will only be able to get the loan or be eligible to get the loan in the amount of 50% of their equity. This implies that in order to qualify for 1000$ loan, you will need to have 2000$ dollar worth equity in your vehicle.
Following are the things to kept in view while opting for auto equity loan-
- A person must be atleast 18 years old, employed and should have a driver’s license.
- He should be able to furnish to the satisfaction documents of the original loan showing remaining balance as well as payment history.
- He will be able to continue driving the car as usual for duration of the loan.
- Negative point in this type of loan is that people with poor credit ratings may find difficulty in getting approval of loan.
As stated above title loans are similar to auto loans in most of the spheres. Some of the similarities shared by both are- minimum requirements of age, employment vehicle insurance are all same as is the risk possession as a result of non-payment. The main and most important difference between the two is that in order to be eligible for this type of loan, a person must own his car outright. If he is still making payments on account of this purchase of car, or has some encumbrance on his vehicle, his application won’t even be considered.
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Important points relating to title loan are-
- The vehicle should not be more than 10 years old. It should be in a sound drivable condition. It should also have a wholesale value for more than 2500$.
- The loan amount among other things shall be depended upon the person’s ability to make timely payments and car’s overall value.
- If the loan is approved, the person shall be required to handover the vehicle title and even the spare key.
- The person will have full access to drive the vehicle as long as he doesn’t default upon the payments.