Car collateral loans are relatively easy to get approved for, even if you have bad credit. Collateral loans virtually power the entire American economy, allowing individuals and businesses access to funding that they would otherwise never be able to get. In recent years, car collateral loans have skyrocketed in popularity, especially here in Southern California where the housing crisis reached a fever pitch.
What are Car Collateral Loans?
Car collateral loans are a fast and extremely easy way to get funds quickly, and they’re especially popular for people who have bad credit. Collateral loans can be obtained by borrowing against other personal collateral other than cars, but people are especially fond of car collateral loans because they’re easy, often allow you to keep possession of your vehicle while you’re paying back the loan, and typically don’t require credit checks. Title loans are issued based on your ability to repay the loan.
How Do Collateral Loans Work?
- Borrowers take out a loan from a lender, promising to pay back their loan in full and on time according to the official contract stipulations
- To protect the lender from losing everything if the borrower can’t repay their loan, the borrower must offer something of value as ‘collateral’ (in the case of auto collateral loans, the borrower’s car would be used as collateral)
- If the borrower defaults on the loan, the lender takes possession of whatever was offered as collateral
Southern California lenders often require collateral to help reduce their risk of lending money, especially after so many lenders were forced to write off bad loans after the recent financial crisis. By securing their loans with collateral, lenders are able to offer lower interest rates, less fees and other costs because there is a safety net attached to their lending.
Thus, collateral loans are extremely valuable to borrowers because they can save them tens of thousands of dollars in interest and other fees, and they’re valuable for the lenders because they provide insurance against losing all the money that is loaned if the borrower can’t pay their loan.
Some collateral loans require that the borrower actually hand over physical possession of the collateral (like loans at a pawn shop), while others don’t require turning anything over at all.
If you want to get a loan using your car as collateral, then you’ll likely have to provide your lender with the car’s title while you’re making loan repayments, but you might be able to keep possession of the actual car itself so that you can continue to use it like normal.
Why Should You Consider Getting a Collateral Loan?
Collateral loans (also called secured loans) offer lower interest rates than unsecured loans, since the lender is guaranteed to get something of value even if you can’t pay back your loan. Collateral loans are especially helpful to people with poor credit, to those who don’t have money for down payments on traditional loans, and to anyone who’s gone through a bankruptcy, foreclosure or other financial crisis that prevents them from qualifying for an unsecured loan.
The biggest advantage to loans with a car as collateral is that they can be obtained extremely quickly, typically within a couple hours of first contacting a title loans company. The speed of vehicle collateral loans makes them one of the best ways to come up with emergency money for paying rent at the last second, avoiding a default on your mortgage, or any other budgeting shortfall that requires immediate financial assistance.
Four Examples of Collateral Loans:
1. Car Title Loans
Car collateral loans, sometimes referred to as “pink slip loans”, “car title loans” and “car equity loans” involve the borrower using the value of their car as collateral for a loan.
These are one of the most popular forms of collateral loans for people with bad credit because virtually anyone in possession of their vehicle’s pink slip will qualify for a car title loan. When you take out a loan using your car as collateral, you can be said to be borrowing money against the value of your car.
Some car collateral loan companies provide better deals to their customers than others, with lower interest rates, higher appraisal values, longer repayment terms and most importantly, the ability to continue using the car you used as collateral for your loan. Not all companies will let you keep driving your car that you used as collateral though (as there is some risk involved in that), so be sure that’s part of your contract if you decide to pursue getting a car collateral loan.
Major advantages to auto collateral loans include that they can be completed quickly, without the hassle of mountains of paperwork, long waiting periods or complicated legal processes. The big downside is that if you default on your loan, you’ll lose possession of your car.
If you live in California and want to take advantage of the unique value presented by car collateral loans, please call Car Capital Financial now at 1-888-500-9887. We can get you the money you need in as little as 30 minutes!
2. Home Mortgages
Probably the most popular form of loan with collateral at stake is a traditional mortgage. Mortgages sound complicated and seem like they’re different from the types of loans being offered by pawn shops, but in reality, they’re virtually identical. When you take out a mortgage on your house, what you’ve really done is received a collateral loan, using your house, apartment, or whatever property you’re attempting to pay off as collateral.
Virtually everyone depends on mortgages to buy their homes, meaning that just about everybody who’s ever purchased a house has received some form of a collateralized personal loan. When someone enters into a mortgage agreement with their bank or other lender, they sign a promissory note that shows their home is being used as security for the loan. If the borrower at any point in time can’t continue to make payments, and defaults on the loan, the lender then takes possession of the house from them as a form of payment for the unpaid loan.
If the borrower pays back the value of their loan in full, the bank returns the promissory note, leaving the borrower in full possession of their property. This is the way it’s supposed to work, but the recent housing crisis showed us all that there are times when the process breaks down, and badly.
3. Stocks and Bonds
Someone who is looking to receive a loan can also use assets like stocks and bonds as another form of collateral to receive a loan. If a borrower has stocks and bonds which are of significant value, they can often use them to receive a personal collateral loan, just like a mortgage would use a house, or a car collateral loan would require using a motor vehicle.
The recipient of the loan borrows money against the value of their stocks and bonds, promising to hand them over to the lender if they are unable to complete the repayment process. However, because stocks and bonds are monitored by the government, there are certain requirements and regulations that must be met prior to their use as collateral. For that reason, collateral loans using stocks and bonds can be more difficult to attain than collateral loans that rely on houses, cars or other possessions.
Many Southern California companies and even some individuals receive collateral loans by borrowing against the value of business-related equipment that they own. This could include things like computers, office equipment, or even heavy machinery. Collateral loans can be offered on equipment as varied as microscopes, musical instruments, high-end computer hardware, or even oil rigs. When it comes to collateral loans, the sky is virtually the limit, as anything which can be appraised of value can be used to attain a collateral loan.
The Pros and Cons of Collateral Loans
Taking out a collateral loan is a major responsibility and there are many things that need to be considered before deciding on what type of loan to apply for.
Collateral Loans – Pros:
- Collateral loans are generally more easily obtained than traditional bank loans and have less requirements that need to be met, because the lender doesn’t have to worry that they will be left with nothing if the borrower defaults on their loan.
- Many collateral loans can even be made without putting a single cent down to receive the initial funding, while traditional loans typically require significant down payments.
- With collateral loans, bad credit usually doesn’t stand in the way of receiving money, as many lenders won’t even request that their clients undergo a credit check (especially those offering car collateral loans).
- Collateral loans can often be rewarded within a matter of minutes, and in some cases, can be made entirely over the phone or via email, making them both a fast and convenient way to get quick access to cash.
Collateral Loans – Cons:
- As with all loans, the recipient of a collateral loan will eventually have to pay the loan back, with interest tacked on. While this isn’t necessarily a problem in and of itself, we would suggest only looking into receiving loans that you think you can actually pay back.
- If the recipient defaults on their payments, they risk their collateral being possessed by the loan company- potentially permanently. However, if you limit yourself to only taking out loans that you will be able to pay back, this is unlikely to occur.
Major Benefits of Car Collateral Loans
Car collateral loans offer some distinct advantages over other forms of fast cash and pawn shops, including:
- Access to quick cash, including large sums if you have a valuable vehicle
- Funds are provided without having to use your home, business-related equipment, stocks and bonds or other important possessions that you aren’t willing to risk losing
- Cars have well-known values which are predictable and can be researched via Kelly Blue Book or other sources, so it’s unlikely that you’ll get tricked into undervaluing your car or other vehicle, which is possible with collectible items, land, houses, or other forms of collateral
- You can get funds within minutes of placing the first phone call, meaning that this is a true form of fast cash
- Many lenders will allow you to continue using your vehicle as long as you continue to make timely repayments on your car collateral loan, meaning that you won’t even have to sacrifice possession of your vehicle in order to get the money you need
Why Choose Car Capital Financial?
Car Capital Financial understands that there are times when taking out a loan cannot be avoided. We offer Southern California with car collateral loans that are quick, easy, and affordable. Our loan specialists are trained to accurately appraise the value of your vehicle and to provide you with all of the information that you need to make an educated decision about whether or not the loan is in your best interest.
We’ve offered reliable vehicle collateral loans to Southern California residents for over 17 years, specializing in providing the best Car Title Loans available. We do not require credit checks, we can often complete loan requests in as little as 30 minutes from receiving your first phone call and we promise to treat you with the dignity and respect that you deserve.