Did you know that you can pawn your car and still drive away in it? An auto pawn loan is a type of secured debt that uses a vehicle title as collateral. If you need a quick loan for an emergency and can’t depend on your credit rating to get one, an auto pawn loan can help you get the cash you need without having to give up your car.
How Do Auto Pawn Loans Work?
We’re all familiar with the way an American pawn shops operates. Pawn brokers lend, the customer, money for a fixed period of time and hold onto a valuable asset that is given up as collateral. Once the cash, plus interest, is repaid, the customer gets the asset back. If you fail to repay your debt, the broker gets to keep or sell the collateral.
Most pawn transactions use jewelry, electronics, firearms and other small valuable items as collateral, but a car title can also be used. Unlike traditional pawn deals, you can keep and use the car while repaying the loan.
Since, the lender takes a higher risk than a pawn shop, they charge high interest rates. However, when compared to the exorbitant interest rates charged for unsecured loans, the interest rates for auto title loans seem reasonable.
Most lenders who deal in car equity loans will lend you up to a certain percentage of your vehicle’s value to ensure they will make their money back if you fail to repay the loan. This value ranges from 33% to 50% or higher of the value of your vehicle.
How to Apply for an Auto Pawn Loan?
Applying for car equity loans are easy when you apply online. Make sure the lender has a secure website because you will be submitting sensitive personal information that could be misused for identity theft.
Applying online is convenient and saves time, but you could make an application by phone if you’re unsure about the security of your personal information. At some point in the process of applying for your auto title loan, you will have to speak to the lender to get approval.
As long as you have all the documentation required, approval can come as quickly as a few minutes and you could have your cash in hand in just a few hours. The document you’ll need is a clear car title that you have paid off or nearly paid off, which will be retained by the lender as collateral for the loan.
If you own more than one vehicle, an auto equity loan can be a quick and convenient source of cash for emergencies. You can use it to pay off urgent debts, make home and car repairs, pay for medical bill, dental procedures or student expenses.
Whatever you do with the cash from your auto pawn loan, make sure you have a plan to repay it diligently. If you default on your debt, it could destroy your credit rating further and make it even harder for you to get loans from conventional lenders.