The only difference is that the borrower’s own risks are reduced: you may not be afraid of losing your home while still being able to use your car . The difference between a loan against a car pledge and other loans is that the borrower will be able to use a small amount, as the amount of the loan usually does not exceed 60-70% of the appraised value of the vehicle. Therefore, a car collateral loan can be viewed as a medium-sized financial service compared to real estate collateral or express loans.
Car loan is very popular because it allows you to get money even in the most unexpected situations.
In addition, a loan against a car collateral is considered a collateralized loan, which is why lenders make concessions and turn a blind eye to some of the borrower’s financial malfunctions or defaults. This service became the most sought after due to auto pawn shops, which do not pay attention to the customer’s income level and his credit history .
The first situation
You have no official job . The most common case when money is urgently needed but cannot be obtained on favorable terms from the bank, as the borrower cannot document his solvency. Not everyone will risk mortgaging their home, but with a car, things are much simpler – the amount of credit is also lower, so it is easier to repay and the risks are not as high.
The second situation
Existing liabilities . We often face financial difficulties when we are already in debt. When calculating the borrower’s credit potential, the lender will certainly take into account the outstanding debts that already exist, and this may prevent you from getting the cash you need. To raise your solvency in the eyes of the bank, you offer a car as collateral for credit , thus reducing the creditor’s risks. In many cases, this approach has had a positive impact on the processing of the application.
The third situation
Negative credit file . Nowadays, this attribute plays an equally or pivotal role when considering a credit candidate. If your credit history is broken, you can either take a “break” to fix it or go to non-bank organizations: MFO’s, pawn shops, or brokers. But first, try to send a loan application to the bank for the security of the car, your car may meet all the requirements and your application will be approved. Be extremely cautious about working with non-bank organizations, especially individuals, as there is a high risk of getting into the fraudsters’ nails.
The fourth situation
Money is needed today . If this is the case when you do not have the time to collect the package – the money was needed yesterday, then only the loan against the car collateral is left. Banks can take up to 2 days to process this loan, but in a pawnshop or MFO, it usually only takes a few hours .
The fifth situation
Money to buy a car . This is the most typical case when a borrower comes to the bank with the need to buy a machine. As a result, he obtains money for his purchase by way of credit against the car’s collateral. The pledged vehicle can be both a newly purchased car or a car already owned by the borrower. In the event of non-payment, the car goes to the bank and later, when the car is sold, the creditor covers all his expenses.
This situation is similar to mortgage lending, where the mortgage is the apartment you own, which in the event of non-repayment of the loan is forfeited to the creditor.
What to expect
Loan against car collateral is not as common and demanded as the same product, but against real estate collateral, so the borrower will first have to select all the nearby creditors and find the ones that are right for them. Next, let’s monitor small programs and reviews and leave the most trusted and profitable investors. The final step in the preparation process should be to collect the documents needed to obtain a loan against the car’s pledge:
- Driver’s license.
- If possible, any documents from the workplace, salary statement , copy of the workbook.
- Car technical passport.
- Certificate of entry in the accounts.
- Insurance policies.
As a final point, insuring your insurance on all terms will significantly increase your chances of getting a loan against a car security.
Assessment and requirements
And next, the most interesting begins! However, it is interesting for every borrower to know what amount of credit they can get. So you will have to evaluate your car right after you apply for a loan from the bank.
This event will literally take a few hours if the car is in good condition and has a well-groomed appearance. All costs of the evaluation are borne by the borrower. But it is important that the car is valued as expensive as possible so you can get a great deal of money.
Many lenders offer the services of appraisers with whom they maintain business relationships: this option will significantly speed up the process of securing a loan against a car security. If your bank does not have such requirements, you can contact any independent service station that operates officially .
Procedures to be followed during the evaluation:
- Running gear wear analysis .
- Appearance evaluation.
- Compare prices on similar car models in the market to find the approximate value of the car.
However, it is not only the appraisal that determines whether or not the loan secured by the car will be approved. The car itself must also meet some of the creditor’s requirements:
- Must be fully owned by the borrower. The machine must not be pledged to another bank, seized or encumbered.
- Vehicles of foreign origin must be cleared in accordance with legal requirements .
In addition to these key requirements, the bank may set a certain age for machines that may be pledged. With MFOs and pawnshops, everything is relatively simple: they give out a loan against a car’s collateral, regardless of the year of manufacture.