Vehicle Collateral Loans
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Vehicle collateral loans may be one way to get someone out of an unexpected financial crisis. They may not be the best way out however, and there are a number of things a person ought to consider before diving in to such a business arrangement. There are a number of companies online that will loan a customer a certain amount of money for any reason as long as there is a clear title to a car. In order for a person to qualify for a loan of this kind, certain requirements must be met. "Therefore, my beloved brethren, be ye steadfast, unmovable, always abounding in the work of the Lord, forasmuch as ye know that your labour is not in vain in the Lord." (I Corinthians 15:58)
Vehicle collateral loans are based on a number of requirements. To begin, most companies offering such loans require someone to be at least nineteen years old, and some states require the person to be twenty-one. In most cases, the car, motorcycle, boat or truck must not be more than ten years old and clear title must be held by the person seeking the loan. Additionally, full collision and comprehensive insurance must be in place on the conveyance in question and the conveyance must be registered in the name of the customer seeking the loan. Also, the customer must have a valid driver's license and show a piece of computer generated mail addressed to the customer at the address provided on the loan application. Finally, the customer will have to give the loan company an extra set of workable keys to the auto so the loan company can easily take the car if a default on the loan occurs.
Vehicle collateral loans are usually never for the full amount of what the car is worth on the day of application. Rather, the loans are typically for about half of the car's wholesale value. Some companies use the Kelly Blue Book value which is a wholesale value to decide how to structure their vehicle collateral loans loan amount and some companies use their own resources to place a value on the vehicle. Of course, while some of this application process can take place on the phone, a person will have to bring the vehicle in question into an office so that the condition of the automobile can be assessed. Once the process is completed, usually a person can leave the office with a loan based on one to sixty months of pay back.
Vehicle collateral loans are also available to those who do not have clear title of a vehicle. These are called car title pawns and are based on how much equity a person has in the automobile at the time of the loan request. This kind of loan can be very tricky, especially if it is based on a car that was once financed new to the loan customer. For example, if a person buys a car new and finances most of the cost of the vehicle, the car loses about twenty percent of its value as soon as the car in driven off the lot. On a fifteen thousand dollar vehicle, this is a three thousand dollar loss immediately and if the customer only placed one thousand dollars down on the car, the owner is already "upside down" on the vehicle loan, owing more than what the car is now worth. As the car begins to depreciate as all cars do, the gap between what is owed on the loan and what the car is worth only widens. This all means that unless a car was bought used, when much of the depreciation has already taken place and the owner got a good deal on the used vehicle initially, no car title pawn will happen.
There are a few companies offering vehicle collateral loans that offer fairly low interest rates. Take for example one of the vehicle collateral loans taken out for a forty-eight month period. If a person would be so fortunate as to have sixteen thousand dollars free and clear on the title, that money could be loaned at an interest rate of six and a half percent. For some companies, there are no mileage restrictions and no model year restrictions. Of course, the shorter the loan period amount, the better the interest rates can be for the auto collateral loan offerings available for the consumer.
It is unfortunate to say, but those individuals who seek out such vehicle collateral loans are often the people who are least in position to pay them back. From the earlier description of such loans, a person who has nothing else to offer as collateral on a loan except a used car can easily get sucked into a downward spiral of more and more debt if the money from the loan is not used wisely. For example, if a person borrows money on equity from a car to pay off a higher interest rate credit card, that might be acceptable. If the money is used on a valid home improvement such as the remodeling of a bathroom or kitchen, this kind of loan could possibly pay for itself. On the other hand, if this auto equity loan is used for a vacation or new clothes or new television set, prudence would dictate that the customer wait and save his/her money and pay cash for such items.
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