Types of Loans Available in the Auto Industry

Posted by Denver Templeton on August 1st, 2019

There are several options available when you need to get a car loan with bad credit, depending on what your needs are and which options you may qualify for based on your credit score. The various option that may be available to you may include applying for a loan in bank, credit unions, or taking out a car title loan or an auto equity loan among others.

Obtaining Loans in Banks

Before you can get to qualify to obtain an auto loan in bank, you must have a good credit rating, as banks want to make sure that any individual borrower that is getting financed has a good credit standing. Hence, if you do not have good credit, you might not get approved for a loan in a bank. Also there are several documentations required when you apply for a loan in banks, this sometimes put people off and takes time to put all the required documents together. This is why if you are in an urgent need of cash, applying for a loan might not be the best for you because it takes time to get approved and get funding.

Auto Equity Loans

This is a type of loan where you borrow against the equity of your car. Hence, it is a little straight forward because you might not have to undergo any credit check since you are borrowing against the value of your car. Hence, your lender is more concerned about the condition of your car and how much your car is worth. This option is good in emergency situations since it requires a few documents.

Car Title Loans

A car title loan is also called a pink slip loan. It is a type of loan where you will have to use the title of your car as collateral. Your lender will most likely be in possession of your car depending on your state laws and how your lender operates. The title remains with your lender as long as you are sting paying off the debt. As soon as you pay off the loan, your lender will release the title to you lien-free. They will also give you a lien release document showing that you have paid off the loan completely.  This method is also a good option when you are in need of emergency funds.

The advantage of a car title loan is that you can still drive your car around while you are paying off the loan. Although the interest rate may be on the high side since it does not require a credit check.

Whenever you need to take out a loan, it is important to take a look at the options available to you, so that you don’t put yourself in tight financial conditions. Also, make sure you only take a loan when you must, avoid borrowing when it is not a must for you to do so.

You can explore other options of borrowing from your friends and families first, before considering going to apply for a loan in banks, or with title lenders. Learn more about title loans from https://en.wikipedia.org/wiki/Title_loan.