If you need a safe, relatively inexpensive way to secure a short-term loan quickly, you may need to look no further than your driveway. With interest rates making new lows seemingly every month, passenger vehicles have become an increasingly popular means of leverage without the hidden charges and conditions of some types of loans. Keep reading to learn how to turn your car into a cash cow.
Characteristics of a Vehicle Loan
So what exactly does borrowing money against your vehicle entail? For starters, loans made against the value of your car are secure, meaning they’re backed by real asset. Secure loans offer another benefit: some lenders won’t run a credit check as a condition of making the loan, which is great news if your credit history is less than perfect. Like payday loans, vehicle loans can be made in a matter of hours, making them a superior option if you find yourself suddenly in need of cash. Other outstanding loans and liens may disqualify you from consideration for a vehicle loan, though, so make sure your car’s note has been paid in full before applying for one.
Deals On Wheels
If you are used to paying high interest rates on initial car loans, don’t fret. These days, your interest rate on a loan made against a vehicle that you already own shouldn’t be much higher than that of a typical mortgage, and it may be lower if you borrow through a member-supported credit union. In some cases, you will be able to borrow up to 100 percent of your car’s value. Try getting that kind of leverage from a home equity line of credit or traditional car loan!
Secure Storage Arrangements
Some companies now offer secure storage arrangements, storing your vehicle in a secure facility in exchange for a sizable loan. These arrangements are a good deal if you have poor credit and don’t need your car on a daily basis because. Most secure storage arrangements have short, fixed terms of six months or less, with an option to extend the agreement if you need more time to repay your loan.
The Borrowing Process
Traditionally, you can borrow money against the value of your car through a bank or credit union.
- 1. Meet your banker. Whereas secure storage companies often don’t run a credit check before they lend, a typical bank or credit union will. Bring in your social security card, recent pay stubs, and any information on your outstanding loans. These will be used to determine how much cash you are eligible to borrow.
- 2. Pick a term. Agreeing to a shorter loan term, on the order of two or three years, will save you lots of money in the long run. Of course, you will need to pay your principal back faster.
- 3. Set up auto-pay. Most banks will shave a few points off your interest rate if you elect to make your loan payments electronically every month.
Borrowing money against your car is just as simple as getting a regular car loan, and in some cases it may not even require a credit check. Be sure to shop around for the best rates and consider the differences between a secure storage arrangement and traditional loan before signing anything.
Catherine Harper is blogs about loan options. Catherine writes about how to compare log book loans to find the best deal.