Auto equity loans: What they are and who they’re best for Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by offering interactive tools and financial calculators as well as publishing original and objective content. This allows you to conduct research and compare information for free and help you make financial decisions with confidence. Bankrate has partnerships with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The products that are featured on this website are provided by companies that pay us. This compensation may impact how and when products are listed on the site, such as for instance, the sequence in which they appear in the listing categories, except where prohibited by law for our mortgage, home equity and other home loan products. However, this compensation will have no impact on the information we publish, or the reviews you read on this site. We do not include the universe of companies or financial offerings that might be available to you. Xavier Lorenzo/Getty Images
3 minutes read. Published 15 November 2022
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Written by Bankrate Written by This article was generated with the help of automation technology, and then checked and edited by an editor from our editorial staff. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to control their finances through providing concise, well-studied information that breaks down otherwise complex topics into manageable bites. Reviewed by Mark Kantrowtiz Reviewed by Nationally recognized student financial aid expert Mark Kantrowitz is an expert on student financial aid as well as the FAFSA as well as 529 plans, scholarships education tax benefits as well as student loans. The Bankrate promise
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If you’re looking to get an auto equity loan, check with your credit union or bank first. They may offer the loan, or may have a partner that they can connect you with.
Auto equity loan is different from. auto title loan A car title loan is a short-term loan that relies on your vehicle as collateral. More often than not it is the case that car title loans are much more expensive as compared to auto equity loans. Contrary to this, auto equity loans often come with longer terms and less interest. Advantages of an auto equity loan A car equity loan comes with a number of benefits. Faster approvals. For those who have bad credit, an auto equity loan can mean quick approval. Because you can use the equity of your car as collateral, the lender can ensure that it’s getting its money back. Larger loans. Similar to any equity loan the amount you are able to borrow is partly dependent on the amount of equity you own in your vehicle. If you own a car worth $10,000 and equity of $5,000 can get a $5,000 loan as an example however, someone who has a less desirable car might not be able take out an loan at all. The interest rates are low. The rate you get on an auto equity loan is directly connected to the credit rating and how much you value your vehicle. If your car is worth a lot it is possible to secure a favorable rate, even with less-than-perfect credit. Drawbacks to the car equity loan There are a few disadvantages of taking out the auto equity loan. Your vehicle is the collateral. An auto equity loan utilizes your vehicle as collateral. This means, if you don’t pay your loan, the lender may take possession of your car in order to recover the losses. The loan is hard to come by. Auto equity loans aren’t very popular. If you’re planning for the auto equity loan, check with your credit union or bank first. They might offer this service, or they may have a partner they can connect you with. Which auto equity loan is ideal for? An auto equity loan might be the best option for you if you meet the following criteria: You have an equity in your vehicle. The most important part of being a suitable candidate of an auto equity loan is having enough equity to make a loan out against. You can afford to make payments. Because your car is on the line, it’s important to know that you’ll be able to pay every month. If you fail to do so make payments, your vehicle may be taken away. This could be a problem if you need the car on a daily basis. Interest rates may be less than what you’re currently getting. If the rates of interest on an auto equity loan are less than traditional personal loans and various credit alternatives, it might make sense to opt for this uncommon loan instead of something that’s more accessible. Alternatives to auto equity loan If you can’t get the auto equity loan or when the process of applying isn’t as smooth as you would like, you may want to think about loan alternatives that don’t require your vehicle. Home equity Similar to the auto equity loan one of the main reasons for this is having equity in your home. It is typical to be able to borrow up to a percentage of the equity you have or a set amount. If you own your own home, this may be a viable alternative. Loans for personal use loan Personal loans are a solid alternative to an auto equity loan However, the rates are likely to be a little higher as they aren’t secured. The process of applying for the personal loan is similar to the process of getting the auto loan and can be made in person or via the internet with a variety of lenders. Credit cards, while they’re an option, they are typically far more costly than an individual loan and secured loan. However, they are more affordable to get and can provide instant access to credit after the approval. Next steps An auto equity loan is a great idea if you’re the market for an loan with a low interest rate. But it’s important to budget accordingly, as your car will be at risk if you cannot pay the loan. Learn more
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Written by This article was created using automated technology that was then thoroughly edited and checked by an editor from our editorial staff. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing concise, well-studied details that cut complicated topics into digestible pieces.
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Review by Mark Kantrowtiz by Nationally known expert on student financial aid Mark Kantrowitz is an expert on student financial aid including the FAFSA and scholarships, 529 plans, education tax benefits and student loans.
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