If you are in need of cash immediately, there are various options at your disposal. There are payday loans, cash advances, and car equity or auto title loans. Payday loans are short-term, and you can pay it back once your paycheck comes through. It is usually for people who are in need of money and there is time till they get their salary. Other types of loans, taken from credit unions or banks take time for processing and are not as quick as payday or car title loans.
Similar to payday loans are car title loans. Car title loans and auto equity loans are similar in means to quick cash. They have quite a few similarities and makes people believe that they are one and the same. However, this is not correct. There is a website key difference between the two.
What is the difference?
The basic features of a car title loan and an auto equity loan are the same. Both have the following characteristics:
- Uses the car as security or collateral
- No need for a credit check
- Short and quick application and approval process
So, what sets them apart?
For a car title loan, you need to be the complete owner of the car, which you are planning to use as collateral. If the car was purchased on a loan, which is still outstanding, means the lender of that loan is the owner of the car till the loan is paid. In such a case a car title loan will not work.
However, in the scenario described above, a car equity loan can be applied for. It is something like refinancing, where you use the equity in the car to get a loan, even if the older loan is not paid off completely. So, for a car equity loan, you need not be a complete owner and you can take out a loan.
For example, you purchase a car worth $30,000 in the previous year on a loan after making a $10,000 down payment. However, a year later the value of the car is $20,000. If you bought the car without a loan earlier, that is you spent $30,000 out of your own pocket, then you can get a car title loan for $20,000.
However, if you have initially bought the car on a loan at $40,000 and this year you pay an installment of $15,000, while the current value is $30,000, then your equity would be $5,000, as it the difference between the outstanding loan balance and the value of the car. In such a case a car equity loan would work, but the value of the loan would be based on your equity, that is $5,000.
The amount that can be borrowed will be higher in case of a car title loan as you are the full owner. There are lenders for online car title loans who can easily process your application and provide quick cash with low interest car title loans.
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