Using Your Car as Collateral for a Loan

How Does a Car Collateral Loan Work?

A car collateral loan operates like most secured loans. For any asset to qualify as collateral for a loan, the borrower must have equity on the intended asset. As such, to use your car as collateral for a secured loan, you must have accrued equity on it. Equity being the remainder between the actual value of the car and the amount yet to be paid on it.

Lenders also consider the age of the car when determining the value of the collateral. The older the car, the lower its value, and the lower the amount of equity. This is because older cars have been in the market for a long time and their value has already dropped. A car’s market value depreciates very quickly after it has been on the market for more than two years.

How Much Can You Borrow with a Car Collateral Loan?

The amount you can borrow is directly proportional to the age and condition of the car. Lenders will typically require you to bring it in to determine its value/equity. The evaluation can be done by an independent appraiser or by the lender’s representative.

Generally speaking, you can expect to get up to 50% of the value of the car for a car collateral loan. However, the lender has the final say in determining the amount of equity that can be taken from the car. This means that you can get more or less than 50% of the car’s value, depending on the criteria set by the lender.

Companies That Offer Car Collateral Loans in Canada

If you are looking to apply for a car collateral loan, here are some of the most popular Canadian companies that you can choose from:

• Title Loans Online Canada
  Title Loans Canada offers car title loans and motorhome loans to vehicle owners across Canada. They offer car title loans between $2,000 and $25,000 with a repayment term of 12 months to 48 months. They charge an annual interest rate ranging from 14% to 32%.
• uLoan
  uLoan offers secured title loans for Canadians who own a car, truck, SUV, semi-truck, or heavy-duty equipment. They offer loans between $1,000 to $50,000 with an APR that can go as high as 36%. You need to directly get in touch with them to learn more about their payment terms.
• Easy Title Loans Canada
  Easy Title Loans Canada has been in the business since 2009. They offer secured title loans of up to $25,000 with interest rates ranging from 29.9% – 46%. Their loan maturity date can last between 12 months to 48 months.  

Conclusion

A car collateral loan is a very useful financial tool for vehicle owners who need to raise money fast. It is not a good idea to use it as an alternative to a traditional unsecured loan. You can use it to cover unexpected expenses, pay off debts, or even consolidate your debt. It is a very easy and hassle-free process.