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  • Writer's pictureJessie

Car Equity Loans: 5 Things to Consider Before Applying & Safeguards

When faced with difficult financial times, a lot of individuals reach out to banks, payday lenders, and friends and family members looking for a loan. The problem with these routes is that they either require an excellent credit score, provoke embarrassment or shame, or require you to pay back the loan from your next paycheque or face high fees and interest charges. A fourth option, if you own a vehicle, would be to borrow money on your car, often called a car title for cash loan or car title loan. This type of loan does not require you to have excellent credit, is a secured loan so you can still use your vehicle and can provide you with a value between 25-50% of your car in cash. In this article, we are going to look at some points of consideration before applying for a car title for cash loan and some safeguards to take if you do decide it is the right option for you.

· Car Requirements: in order to even qualify for a car title loan, there are a few requirements you must meet with your vehicle. First, the car needs to be in your name, and it needs either be mostly if not fully paid off. Beyond this, your vehicle should not have a pre-existing lien on it, however, some lenders will still offer you a car title loan if your car can be sold for more than the pre-existing lien. A loan amount can be anywhere between 25-50% of the value of the car, which means that your car’s market value needs to be high enough to cover the amount you desire.

· Can You Afford to Pay the Loan? There is no secret about it, car title loans can get extremely pricey and expensive, fast. Depending on what company you choose to go with, the car title loan could be due in 30 days, 90 days, or a few years. However, the longer the loan term, the more you will pay in total interest. It is advisable that you find out what the interest rate will be on the initial principal amount you are borrowing and whether there are any additional costs or hidden fees. Not being able to afford to pay the loan or miscalculating on whether you can, can prove to be extremely costly.

· Want Cash or Cheque? If you are looking to get a car title for cash loan, you are going to have to go into the lender’s place of business. Otherwise, if you are choosing to apply for a loan online, you may be required to use pre-authorized debits for your monthly payments. If you go with pre-authorized payments, these will automatically come out of your bank account or credit union account and can be subject to non-sufficient fund fees (NSF) if you do not have enough money in the account at the time of the payment.

· A Stolen Car or an Accident? If your car gets stolen or you get into an accident, you are still responsible for paying back the car title loan. In an accident situation, your insurance company will review the claim and may choose to settle with the lender directly. If this happens, be wary that all the insurance money may go directly to the lender. If your vehicle is a write-off or it gets stolen, your insurance company may settle the car title for cash loan by directly paying the lender the value that your car could have sold for (market value) prior to the theft or accident. If the market value does not cover the entire loan, you are responsible for the remaining balance. If you cannot pay this amount, some lenders may choose to sue you for it in some provinces and territories (where legal).

· Interest Rates & Fees. Prior to signing the contract, understand what type of fees are associated with the car title loan. Some lenders may charge a vehicle evaluation fee to determine the value of your vehicle, some may do a title search to see if there are any liens on your vehicle, and some may do a search fee to see if your car has been in any accidents. Beyond this, you may be subject to an administration fee for setting up an account, a registration fee so that a lien can be placed on your car, a roll-over fee to extend your loan term, and an installation fee to place a GPS tracker on your vehicle as well as an ignition immobilizer. In Canada, the highest interest rate one can be charged for a title loan is 60% annually.

It is very important that if you do decide to borrow money on your car, that you do background checks on all car title loan companies and websites that you are going to apply with. This will help you make sure that the company you go with is insured and licensed, which will give you peace of mind against things like potential identity theft and credit repair schemes.


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