There are very few ways that borrowers with bad credit can get quick funds for emergencies such as student expenses and tuition, a death in the family, hospitalization, car repairs or any other situation that has to be tackled quickly. One way to get around this is to take a title loan.
When applying for an auto equity loan, borrowers with bad credit must have collateral, like a car title. Loans like this can be tricky because, if the borrowers fail to make the necessary repayments according to the terms of the agreement, the car and its title become the property of the lender. The lender can then repossess and sell the car at a profit.
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This type of debt is also called an auto pawn loan because it is similar to pawning an item, except that pawn brokers typically hold on to their collateral until the debt is paid. The difference here is that most lenders will let you hold on to your car while making repayments. So you can drive around and continue to use your vehicle for all normal activities while you spend the cash and repay the debt.
Get Equity loans Approved Even with Poor Credit
There are some conditions you must meet when you take an equity loan. In order to qualify, you must show proof of ownership for the vehicle that is being used as collateral. An example would be your name on the car title. Loans on the car must also be paid off or nearly paid off. The borrower will be asked to provide proof of both of these conditions before the loan amount is handed over to you.
Most lenders will also run a credit check prior to giving you money but since your debt is secured by a car title, a bad credit record will not usually deter them. Equity loans are less risky for lenders because they are not at risk of losing any money.
Your lender will calculate your auto equity to determine how much money your car is worth. Because they need to ensure that you have a plan and the means necessary to repay the equity loan, your employment status and source of income may also be checked by the lender before granting approval.
Lenders will usually offer between 25 to 50 percent of the car's value.
Should the borrower default on their payments, the lender will have to repossess their car title. Debts that you have defaulted on still need to be paid for, so the lender will have to sell the car to cover the debt. If your vehicle is essential to your livelihood or lifestyle, you can't take the chance of losing it. So, when you take a loan, make sure you have a plan to repay it and the willingness to do what it takes to budget your expenses so you can make the payments on time.
If you're willing to follow the strict repayment terms and schedule set down in your agreement, a car equity loan can not only be a good option for getting you out of debt, but could even help you establish a positive payment record and improve your bad credit rating. Most lenders report to all three credit bureaus, defaulting on an equity loan can make your bad credit worse.
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