What are Pink Slip Loans?

Posted by Azizam Taylor on January 17th, 2020

What is a pink slip loan? Simply put, a pink slip loan is an arrangement in which an owner of a car offers up their vehicle title as collateral in exchange for a sum of money. The amount of money awarded for a car title loan is based on the equity value of the vehicle. The majority of car title loan lenders operate out of brick-and-mortar locations and online.

Regardless of whether you apply online or in person, you will be required to complete a loan application. Once you have been qualified, you will need to present your car, the car title, photo ID, proof of insurance, proof of income, etc. Be sure to review the loan terms and conditions before you sign anything – lenders are required to disclose the cost of the loan and the APR. Learn more at https://spacecoastdaily.com/2020/01/everything-you-need-to-know-about-car-title-loans-in-california/

When the borrower pays back the loan, they receive their title back. However, if they default, the lender has the option to sell the vehicle in order to recoup their investment. That collateral is why a borrower’s credit score doesn’t really factor into the agreement. The score won’t impact the terms because they’re based almost entirely on the value of the vehicle. A lender would never offer more than the amount they could receive from selling the car.