If you need cash and you have a valuable vehicle, you may be exploring options to get access to the money you need. Auto equity loans are one of the options you have to borrow against the value of your vehicle and are similar in many ways to online title loans.
However, auto equity loans differ from the title loans offered by Title Loan Fast in a few important ways. Let’s discuss the basics of this loan product now.
What Are Auto Equity Loans?
Auto equity loans are a type of loan that is taken out against the value of your car. You can think of an auto equity loan as being similar to a home equity loan.
However, instead of being taken out against the value of your home, an auto equity loan is taken out against the value of your car. If you don’t pay, the lender has the right to repossess your car and sell it to make up for their losses.
Compared to home equity loans, auto equity loans are riskier and tend to have higher interest rates. This is because cars are a depreciating asset, and lose value over time, which increases the lender’s risk. In contrast, homes usually appreciate over time, which decreased the lender’s risk.
Are Auto Equity Loans the Same as Title Loans?
On the surface, an auto equity loan may seem very similar to a title loan. In both types of loan, you turn over your title to a lender in exchange for a set cash payment. Then, you will repay the loan over time, and get your title back. However, there are some major differences you should be aware of.
- Longer repayment term – Most title loans are issued for the short-term and have to be repaid in a month. Some lenders, like Title Loan Fast, offer 6, 9 or 12-month installment title loans, but this is rather rare.
In contrast, auto equity loans are usually issued for terms of between 2-5 years, which is much longer than any common type of title loan.
- Harder to qualify – Usually, it’s very easy to qualify for a car title loan. Your credit score doesn’t matter, and you can usually be approved as long as you are employed, have an income, and have a “free and clear” car title.
However, auto title loans are harder to qualify for. They may require you to have a higher-value car, and the bank may look into your credit score and credit history. If you have serious credit issues, you’re unlikely to be approved.
- Lower interest rates for qualified borrowers – If you do qualify for an auto equity loan, you can expect to pay a lower interest rate, compared to a title loan. Interest rates for auto equity loans are typically capped at 36%, while the APR of a title loan can be higher.
Know the Difference Between Auto Equity Loans and Car Title Loans!
These two types of loans may seem similar, but there are some big differences. Auto equity loans are a good option if you have a valuable car and good credit, while online car title loans are a better option for emergency cash if you have a lower-value car and poor credit. Know what’s right for you – and if you need a car title loan online, apply at Title Loan Fast now!