What is the Difference Between a Car Title Loan and an Auto Equity Loan?

What is the Difference between a Car Title Loan and an Auto Equity Loan?

Given the fact that there are an endless number of lending options you can choose from on the market, it can get overwhelming trying to figure out which lending choice is best for your needs.

Car title loans and auto equity loans may seem like the exact same thing, but you will notice some subtle differences once you take a closer look to the actual loan terms. For example, title loans are loans backed by your car's title, which acts as collateral and ensures lenders feel secure about offering you a hefty sum of money.

Auto equity loans, on the other hand, are based off of your car's equity plus the money you still have to pay back on the car loan. When you apply for an auto equity loan, you allow the lender to refinance your loan, so the amount you borrow is then added to what you already owe on the car.

Auto Equity Loan Benefits

Which lending option is best for you? That is only something you can determine based off your personal needs. Both car title loans and auto equity loans are ideal for short-term lending purposes and in situations where you must get cash on short notice.

Banks and other lending institutions may take up a lot of your time with a lengthy application process and there is no guarantee you will be approved for a loan, especially once they discover that your credit score is not up to par. Title loans as well as auto equity loans are accessible to you no matter what your credit rating is because the loans are backed by your vehicle title and equity instead.

You can get an auto equity loan in Illinois even if you do not own the car outright. When you apply for a car title loan, the title of the vehicle must be in your name. The whole purpose of letting the lender have the title is to ensure they have something to fall back on if you are unable to hold up your end of the bargain. It isn't as scary as it sounds - you will be able to keep driving your vehicle if you take out either type of loan.

Other Short-Term Loans

If neither of these lending options sounds like they are your cup of tea, you can always apply for a payday loan. Payday loans are similar to car title loans and auto equity loans in the sense that they are short-term loans that you can apply for no matter what your credit score is like.

Payday loans differ from the former two loan types in that they are unsecured, which means that the lender does not require anything to back the loan with. That could work to your advantage if you are uncomfortable giving up your car title or refinancing your car loan.

The bad part about payday loans is that you cannot get as much cash as you could from car title loans and auto equity loans, which allow you to borrow up to $40,000 within 24 hours of being approved. Payday lenders are not as comfortable letting you have a significant loan amount with nothing to fall back on.

In fact, with a payday loan it is likely that you will end up paying outrageous interest rates with a short repayment period. Auto equity loans and car title loans, on the other hand, offer flexible payment schedules and rates as low as 3%!

Given these facts, do you really have much to think about? If you are looking to get a loan that won't overwhelm you, then auto equity loans or car title loans are clearly the better choice to go with. Fill out an application now to get started on the process!

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