Things to Consider When Applying for a Car Collateral Loan

Car collateral loan enables you to have the cash you need without depriving you of the use of your own car for traveling. With the convenience this loan provides, many readily dive into the application when the need arises. However, a borrower should know more than the requirements and eligibilities.

Before filing your application, these are the things to consider when applying for a car collateral loan:

1. Purpose of getting collateral loans

Taking a loan has always been an option for additional funds or emergencies, but the habit of owing money without caution leads to an unfortunate series of dilemmas – and may lead to financial depletion. It is important to have a plan when applying for one.

OR/CR loans are secured loans that place your car title in the hands of lenders – and if fail to repay your debt, your car will be compromised. So, identify your purpose of getting a loan and how much you need. Match it with your current financial status and plan how to repay it.

2. Value of your car

Financing institutions accept car titles as a form of collateral for a loan because of the car’s value. This means that having a car doesn’t necessarily translate to getting your application approved. For a higher chance of approval in a secured loan, the borrower must have equity in the collateral used, which is a car in this case.

Equity refers to the difference between the remaining debt on the loan and the collateral’s value. If the resale value of your car is P468,000 and the remaining amount you owed is P310,000, then your equity is P158,000. Because the collateral’s value is worth more than the loan, the chance of getting approved is high.

3. Risk of losing your vehicle

Every collateral loan discloses this risk of losing your possession. When you sign a contract that the item you presented is accepted as collateral, you agree that it will be taken away from you should you fail to repay your loan on a given period.

When it comes to car collateral loans, a borrower’s failure of repayment has the same results as any secured loan. If you are delinquent with your payments, it will be difficult to renewal your car registration. Defaulting the loan (even after the grace period provided) gives the lenders the right to repossess your vehicle, even if the car title is submitted as collateral.

However, some loan providers can be negotiated to help you repay the loan.

4. Pre-approval before the loan application

One technique of processing your application faster is to apply with lender-proven eligibility at hand. You can have yourself assessed in advance and get pre-approved by a bank or reputable financing institution before you submit your application to the car dealership or lenders.

A lender-approved offer shows that you are capable of paying the loan you intend to get. This strengthens your profile as a borrower and puts you I n a stronger position when it comes to negotiation.

5. Choosing the right lender

You can find a variety of financial institutions in the market that offer car collateral loans. The loan providers can be classified into three: banks, dealership, and non-bank entities.

Banks had always been the first choice for these kinds of loans, but the processes involved and the length of application that the borrowers have to go through can be long and inconvenient. On the other hand, the dealership is another common option, which should be taken with utmost care. Some offers may be too expensive or extra for your needs for dealers to meet their quota and earn a commission.

You may opt to apply with the loan providers that are non-banks. These are financial institutions that offer loans and other financial products in an easier application process and more accommodating requirements. Lenders like Global Dominion have personalized services to help you in your loan repayment while getting the borrowed amount.

Regardless of where you will get the loan, you have to make sure that the lender is a reputable company or established financial institution. Research on their products, interest rates, and customer feedback to ensure that you will get your money’s worth. It is important to compare the lenders and what they offer to find the most appropriate product for you or avoid getting exploited by greedy dealers.

Your takeaway

Unsecured loans are easier to get anywhere, but it comes with high risks. On the other hand, it doesn’t mean that secured loans cannot give you trouble. Your car and its title depend on how you manage your repayment terms.