What is an auto Equity Loan?

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What is an Auto Equity Loan?
By Amrita Jayakumar Writer The Washington Post Amrita Jayakumar was a former special-assignment writer for NerdWallet. She also wrote a syndicated column about the financial situation of millennials, and focused on personal loans and consumer credit as well as debt. Previously, she was an editor at The Washington Post. Her work was published in newspapers such as the Miami Herald and USAToday. Amrita has a master's diploma from journalism at The University ofMissouri.





February 8, 2017


Written by Kim Lowe Lead Assigning Editor The consumer lending Kim Lowe leads the personal loans editorial team. She was hired by NerdWallet following 15 years of in charge of the content on MSN.com that covered travel, health and food. Her first job was as a writer for magazines that covered the mortgage food, restaurant and supermarket industries. Kim received an undergraduate degree in journalism at The University of Iowa and a Master of Business Administration from the University of Washington.







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A car equity loan is similar to the home equity loan however, you make use of you vehicle instead of your home to get an loan, then pay it the loan back using interest.
Like all loans, auto equity loans have a risk. If you don't make your loan payments the lender may take over the car. If you use your car to commute to work or school the repercussions of repossession is evident. In certain instances lenders can affect your credit score in the event that it reports your late payments to credit bureaus.
With these dangers to your financial security in mind, we suggest auto equity loans solely for emergency situations -- and even then, there are usually better alternatives .
Apart from auto equity loans Other ways to borrow against your car are through a cash-out option and , both of which must be utilized with caution.
Where can you locate auto equity loans
A majority of community banks and credit unions provide auto equity loans. The costs for such loans depend upon your score on credit, credit history, and the value of your vehicle.
The four largest banks in the United States by deposits -the banks - Bank of America, Chase, Citibank and Wells Fargo do not provide auto equity loans, but some smaller banks do.
For federal credit unions the maximum annual percentage rate that can be charged on such loans will be 18.5% however, there could be additional fees for applications.
You might be eligible for an auto equity loan from a different lender than a community credit union or bank. Such lenders, many of that are online, provide secured loans with a maximum APR of 36% and two- to five-year repayment terms. Consumer advocates and regulators agree that three percent is considered to be the upper limit of an affordable loan.
Two big lenders for car equity loans are and provide secured loans below 36% to car owners with poor credit scores, usually under 630.
Another lender extends the auto equity loans to those who have poor credit ratings or lower, but it has fees in addition to its stated APR that makes the loan more expensive.
Another way to get a loan against your vehicle
Auto loan refinancing
is logical is if interest rates decrease or you're not able to meet loan payments. Some lenders also offer , which let you take a new auto loan for a larger amount than what's left on your initial loan. This amount is different for each lender and usually depends on the amount of equity you have in your car. The new loan is a replacement for the old one and you'll keep the cash.
Auto title loans
Auto title lenders can provide you with fast cash in exchange for the title to your vehicle as collateral, and without checking your credit. This means you can get a loan even having bad credit however, it also means that you could be at greater risk of defaulting.
Similar to payday loans, car title loans have very high interest rates -- around 300% -- and are usually due in the shortest time frame, typically 30 days. A large percentage of title loan applicants are required to extend their loans, according to an investigation from the Consumer Financial Protection Bureau, incurring additional fees and raising the chance of repossession.
Be aware of the importance of car insurance
No matter which kind of auto equity loan you choose, lenders typically require proof of insurance. If you have paid your car off, you may opt to just carry liability insurance that is mandatory in many states and dropped comprehensive and collision insurance.
If that's the case with you, lenders for auto equity may offer you the option to purchase a kind of insurance known as an "debt cancellation additional" also known as " ," that covers the cost of your loan payments in the event that your vehicle is damaged, or you lose your job or have an accident. Unlike comprehensive and collision coverage, credit insurance does not cover the expense of fixing your vehicle.
Credit insurance is expensive and isn't as part of the cost of the loan. It is usually cheaper to purchase comprehensive and collision insurance instead.
Find .
Take a look at other items worth your money; you don't be putting your vehicle at risk or your credit.



About the author: Amrita Jayakumar is a former writer at NerdWallet. She has previously worked for The Washington Post and the Miami Herald.







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