How Auto Equity Loans Work And What's Required

If you've recently been turned down for a loan because of your credit history, an auto equity loan may be worth considering. These loans use your vehicle as collateral, and that means your credit score is less important than your vehicle's value and your ability to pay off the loan.

Auto equity loans in California typically range from $2,500 to $20,000, with qualified borrowers receiving loans of 40% to 60% of the vehicle's current resale value. Not all equity lenders are the same, and you should expect different requirements and payment terms for most types of vehicles. For example, a car valued at $10,000 may result in a $5,000 loan at California's maximum capped rate of 36% plus the federal funds rate. On the other hand, a vehicle valued at $6,000 can get you at least $2,500, but you'll likely still need to bring it in for inspection.

The requirements for an auto equity loan are similar to those for title loans in CA, and anyone who applies with a paid-off vehicle has a good chance of qualifying. The car's title must be in your name, and there can't be any lienholders on it. Additional requirements include a valid government-issued ID and proof of income to demonstrate your ability to afford the monthly payments. Prove your income with bank statements or a letter from your employer. While income verification and a paid-off vehicle are the main requirements for a title loan in California, you may also need registration documents and proof of insurance coverage on the vehicle.

Some lenders require an in-person inspection of your vehicle to confirm that it can be used as collateral for an equity loan. These inspections can be completed quickly and often in less than an hour. During the inspection, your lender will review the vehicle's inspection report and confirm that it meets the valuation requirements.

 

A car with considerable equity driving on the freeway.

 

How To Get Approved With Bad Credit

When you need cash quickly and have poor credit, your options with traditional lenders are limited. Auto equity lenders, on the other hand, aren't focused on your credit history; instead, they look at your vehicle's value and ability to repay the loan when underwriting your loan terms.

Pre-approval is available for customers with a lien-free vehicle, and your credit score is not a primary factor in the underwriting process. Lenders want to know that there's a vehicle they can fall back on if you default on the payments, and that's far more important to them than your FICO score. Call California Title Loans at 855-339-1001 today to get started on your application to borrow against the equity in your car or truck.

 

Benefits Of Online Vehicle Equity Loans

Equity Loans Are Convenient - Borrowers applying for equity loans often need emergency cash quickly. All you primarily need to qualify is a paid-off vehicle and proof of income. Underwriting for an equity loan is minimal because we know there's equity in your car, which serves as collateral.

No Extensive Credit Check - Unlike unsecured loans, which often require multiple credit checks, most vehicle equity loans have minimal credit requirements. Your credit score is far down the list of requirements for an equity loan, and you should have no trouble getting approved, even with a few loan defaults or missed payments on your credit cards.

Keep Your Car - Auto equity loans let you keep your car and keep the keys. You don't need to give up daily use of your vehicle; instead, you guarantee your loan with the vehicle's title.

Pay off Your Loan Early - California title loan lending laws prohibit prepayment penalties for auto equity loans between $2,500 and $9,999, meaning you can pay off your loan early and reduce total interest costs.

 

Drawbacks Of Vehicle Equity Loans

High Interest Rates (APR)—A drawback of a vehicle equity loan is the high interest rates, which make it difficult to pay off early. The APR for any secured loan in California between $2,500 and $9,999 is capped at 36% plus the federal funds rate under AB 539, with a minimum repayment term of 12 months. Loans of $10,000 or more have no interest rate cap, meaning licensed lenders in CA can charge much higher rates.

Repossession—You risk having your vehicle taken and sold at auction if you fall behind on payments. If your vehicle is ever repossessed, you'll still have time to get it back, but late fees and repossession costs will apply. Stay updated on California's repossession laws, and contact your lender if you can't make the minimum payments.

 

What Happens If You Miss A Payment

Using your vehicle as collateral for an auto equity loan is a great way to borrow cash, but there's always a risk of repossession. Here's what you need to know in California:

  • Repossession is possible after you miss a payment.
  • California law states that a lender is not required to inform you if it plans to repossess your vehicle.
  • After your vehicle is repossessed, you must be notified about the seizure within 48 hours. Additionally, your lender must notify you within at least 60 days of the repossession and provide at least 15 days' notice of their intention to sell the vehicle.

 

Ready To Apply For An Auto Equity Loan In California?

If you're looking for a fast and convenient way to borrow money without focusing on your credit history, consider an online equity loan in California. Apply online or call 855-339-1001 to get started. Loan amounts start at $2,500, and qualified customers with a lien-free vehicle and proof of income may be able to borrow 40% to 60% of the vehicle's resale value. Apply today.