87% of American families are in debt, and a personal loan is another way to add to it.
But what happens when you need money quickly and you don’t have a lot of other options? Can you use your car as collateral for a loan?
In this blog post, we’ll discuss using a car as collateral for a personal loans and some of the pros and cons of doing so.
Read on for more information.
Using a Car as Collateral for Personal Loan: Am I Eligible?
It is important to remember that just because you own a car, it doesn’t mean you’re eligible to use your car as collateral for a personal loan. Instead, you must meet certain criteria.
These criteria include owning your car completely outright or not owing more than your car is worth. You’ll need to have enough equity in your car to be able to use it as collateral against a personal loan.
Therefore, you’ll need to check with the lender you’ll be getting the loan from to see if they’ll accept your loan based on the amount of equity you have in the car.
Pros of Using Your Car for Collateral for a Personal Loan
The biggest pro of doing this is that if you need money right away, it gives you a way to collect it without having to waste a lot of time applying for loans elsewhere. You’ll be able to get a pretty big chunk of money without doing too much, meaning you’ll be able to solve your temporary financial issue.
Title loans, for example, can help you pay off medical bills, student debt or gain other emergency funds you may need. Life can be unpredictable, so this allows you at least some agency over these circumstances.
If you’re comfortable with the terms of the loan and are confident you can pay it back on time, it can be a good solution to a pressing problem.
Cons of Using Your Car for Collateral for a Personal Loan
The biggest con of using your car as collateral for a personal loan is that your car can get taken away from you if you fail to pay the loan off in full. As you’ve given the title as collateral, failing to agree to the terms of the loan and defaulting means that your lender now owns the car.
When you take out a title loan, you’re effectively placing a lien on your car. This can be incredibly risky if you’re not completely positive that you can pay back the loan, on time and in full.
Is It the Solution for Me?
Using a car as collateral for personal loan is incredibly risky, but some people find it to be a great way to solve a temporary financial problem or hardship. It is up to you to decide whether this is something you wish to take on after weighing the pros and cons heavily.
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Tags: personal finance