Car loans as collateral are those in which you use your car or vehicle as collateral or guarantee of the loan you are requesting. It is a form of loan in which it is usually given up to 80% of the value of the car.
In loans with the car as collateral, the client obtains an amount and agrees to repay it with a series of interests, as he would in any other loan. The only difference is that, instead of presenting proof of income as collateral, it presents the ownership of the car.
Can I qualify for car title loans online only? Absolutely
In case of default, and here comes the important part, the lender cannot keep the car directly. The vehicle must be sold through a public auction and the benefits obtained from the sale will go to the lender. In this case, all the rules would be met and it would be a normal loan operation.
It is important to remember that as with any loan, the lender must indicate the interest rate. If you do not, it increases the possibility that it is a covert buy-sell operation or even a scam. It is very common, by the way, that higher interest rates are required on loans with the car as collateral.
The car title loans online in which you use your car as collateral are usually an easy and fast way to get financing. They usually have flexible conditions.
When to ask for a loan with the car as a guarantee
Car loans as collateral are aimed at people who do not get personal loans easily because they do not have a fixed income source, such as payroll, pension or subsidy. This type of financing is also very attractive for clients with outstanding payments such as GAF or LAI. They may, even if they do not have a good credit score, have a car.
It is advisable to never request a loan if it is not clear how it can be repaid.
Documents to request a loan with your car as a guarantee
- The car must be your property and be fully paid.
- Documentation in order: filming, ITV and insurance mainly.
- ID in force.
- Car technical sheet.
- Last payroll or proof of income if possible.
Certain companies offer car loans as collateral as another loan product, but in reality, they are carrying out a different financial operation. What they usually do is buy the car from the owner (making it appear that this is the loan capital), and allow him to drive it in exchange for a rental (making it look like the loan installments).
What happens at the end of the loan period? Well, the lender, who is already the owner of the vehicle, actually offers the option to repurchase the borrower, many times to the surprise of it.
This type of operation is not a loan but a sale, and although it is not illegal as such, it can easily lead to deception, especially when the person requesting the loan does not carefully consult the conditions. In some cases, one could be talking directly about fraud.
The best option for the consumer is to read carefully the conditions of the operation and not get carried away by the conditions offered. Normally common personal loans offer lower interest and conditions are more transparent.
Compare the best loans
The most advisable, if possible, is to request a personal credit, since it usually offers better conditions. If the services of a comparator are used, we have at least the assurance that we are assessing the conditions of the different companies under the same conditions.