People with financial problems can nowadays easily borrow loans up to 1000 dollars by giving their automobile as collateral security for one of two short-term loan options. These are commonly known as auto equity loans or title loans. People often confuse the two and use them interchangeably. In reality, they are not exactly the same. There are a few things that distinguish them, the most important of them being 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 the law, that is- who are still making the payment on the vehicle. The legal holder is 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 the vehicle. The amount of needed equity for the eligibility of the loan may vary from lender to lender. Still, the 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 to qualify for a 1000$ loan, you will need to have 2000$ dollar worth of equity in your vehicle.
Following are the things to keep in view while opting for an auto equity loan-
- A person must be at least 18 years old, employed, and have a driver’s license.
- He should be able to furnish the satisfaction documents of the original loan showing the remaining balance and payment history.
- He will be able to continue driving the car as usual for the duration of the loan.
- A negative point in this type of loan is that people with poor credit ratings may find difficulty in getting approval for loans.
As stated above, title loans are similar to auto loans in most spheres. Some of the similarities shared by both are- minimum requirements of age and employment vehicle insurance are all the same, as is the risk possession resulting from non-payment. The main and most important difference between the two is that 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 car purchase or has some encumbrance on his vehicle, his application won’t even be considered.
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Important points relating to title loans 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 of more than 2500$.
- The loan amount, among other things, shall be depended upon the person’s ability to make timely payments and the car’s overall value.
- If the loan is approved, the person shall be required to hand over the vehicle title and even the spare key.
- The person will have full access to drive the vehicle if he doesn’t default upon the payments.