A car equity loan is a secured financing option that allows you to borrow against the value of your vehicle. It is a popular financing solution for individuals seeking prompt access to funds with convenient repayment terms and competitive rates. However, this unique loan type is not without its risks and it’s important to understand how it compares to other financing options in order to make an informed decision that is aligned with your financial goals.
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What Is the Equity on My Car?
Your car’s equity is equal to its value minus your outstanding loan balance. This amount can be calculated by using a vehicle valuation service such as Kelley Blue Book or Edmunds. You can use the results of this calculation to determine if your vehicle has sufficient equity to qualify for an auto equity loan.
To get started, visit a lender or online lending network that offers this financing solution. You can typically prequalify for a car equity loan without impacting your credit score by using an online application with these lenders. Once you’ve prequalified, you can then select and submit a full loan application to one or more direct lenders recommended by the lender or lending network.
If approved, the lender will verify your employment and income and review your credit report. This step will help them determine the loan-to-value ratio and the maximum amount you may be able to borrow. Since your vehicle serves as collateral, it is essential that you are able to make payments on time to avoid repossession.