How to Get an Auto Loan for a Car With a Salvage Title?

Table of Contents

What is a salvage title?

A salvage title is a vehicle title brand that indicates the vehicle has been damaged and deemed a total loss by an insurance company. This typically happens when the repair costs exceed a certain percentage of the vehicle’s pre-accident value, usually around 75-80%.

Once an insurance company declares the vehicle a total loss, the title is branded as “salvage.” This alerts future buyers that the car has sustained significant damage at some point.

Vehicles with salvage titles tend to sell at a discount compared to similar clean-title cars. This is because there is increased risk when buying a salvage title vehicle.

Rebuilt title vs. salvage title

A rebuilt or reconstructed title is different from a salvage title. With a rebuilt title, the damaged vehicle has been repaired and inspected to ensure it is road worthy. Once the repairs are complete, the state will re-issue a title branded as “rebuilt” or “reconstructed.”

A salvage title means the vehicle was deemed a total loss but has not necessarily undergone any repairs. This makes a salvage title riskier than a rebuilt title. However, a rebuilt title still indicates previous damage, so these vehicles also tend to sell for less than clean title cars. If you’re considering financing for such vehicles, explore options with lenders who accept Snap Finance for added convenience.

How to buy a car with a salvage title

Buying a used car with a salvage title can be risky, but also presents an opportunity to save money if you take the right precautions. Here are some tips:

Ask a mechanic to do a prepurchase inspection

This is essential to check for any underlying issues, improper repairs, or ongoing safety concerns. A thorough inspection can identify potential problems.

Research the car’s history

Use the VIN number to get a vehicle history report and look for previous accidents, flood damage, odometer rollbacks, and other red flags. This can help you avoid hidden problems.

Determine when the title was issued

More recent salvage titles indicate more recent damage, versus an older salvage title where proper repairs and inspections may have been completed since.

Shop around for insurance and financing

Insurance will cost more for a salvage title car. And finding financing can be challenging. Check rates and options before you buy.

Should I buy a car with a salvage title?

There are pros and cons to buying a vehicle with a salvage title:

Pros:

Cost savings – Salvage vehicles can sell for much less, sometimes 40% or more off clean title values.
May still be a good car – With proper repairs and inspection, some salvage cars provide reliable transportation at a discount.

Cons:

Safety concerns – Damage history raises questions about crash safety and repairs. Airbags and crumple zones may be compromised.
Difficult to insure/register – Insurance costs will be higher. Some states won’t allow registration.
Minimal resale value – Salvage cars are very difficult to sell later and have almost no trade-in value.
Harder to finance – Most banks won’t provide loans for salvage-titled vehicles due to the risks.

How to Get an Auto Loan for a Salvage Title Car

Financing a car with a salvage title can be challenging but may still be possible in some cases:

Take out an auto loan

Some smaller banks and credit unions may provide auto loans for salvage-titled vehicles, but interest rates will likely be higher. Shop around for options.

Use an online lender

Online lenders like Lightstream and Auto Credit Express may offer financing for salvage title vehicles when banks won’t. Rates vary greatly.

Apply for a personal loan

Borrowers with good credit may qualify for a personal installment loan at a lower rate, then use the money to buy the salvage vehicle.

Pay with cash

Since securing a car loan is difficult, paying cash may be the best option for purchasing a salvage-titled car. Make sure to get a thorough inspection first.

List of Banks That May Offer Financing For Salvage Titles

While most major banks avoid high-risk salvage title loans, there are some smaller lenders that may provide financing in certain cases:

Local credit unions – Some offer loans to existing members with good credit and collateral.
Small regional banks – Community banks are more likely to review applications case-by-case.
Online lenders – Companies like LightStream, Auto Credit Express, CarFinance.com consider salvage title loans.
Subprime lenders – Specialize in bad credit risks but rates are much higher.

Examples of institutions that may approve salvage title car loans with certain stipulations:

Alliant Credit Union
Digital Federal Credit Union
Bank of America (case-by-case)
Wells Fargo (case-by-case)
Pentagon Federal Credit Union
Liberty Bank
Andrews Federal Credit Union

Shop around and compare loan terms carefully before borrowing. Individual factors like credit score, income, and collateral will impact options.

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What Is a Salvage Title and Why Is Financing Difficult?

A salvage title indicates the vehicle was deemed a total loss by an insurance company after being damaged. This makes salvage-titled vehicles high risk for lenders:

Damage reduces resale value – Banks rely on collateral. A salvage car is worth less and depreciates rapidly.
May have hidden safety issues – Even if repaired, structural damage compromises crash protection.
Hard to insure – Insurance costs more for salvage-titled cars, if coverage can be obtained.
Illegal to register in some states – Banks don’t want to repossess cars that can’t be registered.
Chance of title washing – Salvage brands may be illegally removed from the title, hiding damage history from lenders.

These factors make salvage loans unattractive for most major banks. But some smaller lenders take on the extra risk.

Lenders That May Finance Salvage Title Vehicles

Here are some examples of lenders that may approve auto loans for salvage-titled cars in certain situations:

Local Credit Unions

Credit unions focused on serving a community or workforce may offer loans to members with a long history and excellent credit. For example:

Alliant Credit Union
Andrews Federal Credit Union
Pentagon Federal Credit Union

Small Regional Banks

Smaller regional banks provide more personalized service and often review applications case-by-case. For instance:

Liberty Bank
First National Bank
Citizens State Bank

Online Lenders

Online lending companies use algorithms and can approve higher risk loans. Examples include:

LightStream
Auto Credit Express
CarsDirect
CarFinance.com

Subprime Lenders

Specialize in borrowers with poor credit but charge very high interest rates. Such as:

Credit Acceptance Corp
Tidewater Finance Co.
America’s Car-Mart

Tips to Improve Your Chances of Approval

Getting approved for financing with a salvage title can be challenging but these tips may help:

Make a large down payment – At least 20% to 50% down shows commitment.
Find a co-signer – A creditworthy co-signer reduces the lender’s risk.
Use collateral – Pledge additional assets like a house or investments.
Repair and document issues – Evidence of quality repairs improves loan eligibility.
Highlight safety features – Like airbags that were replaced properly.
Check your credit – Good credit scores above 700 may help offset the branded title risk.
Apply to multiple lenders – Compare offers to find the best loan terms.

Key Risks of Financing Salvage Title Vehicles

While loans are possible in some cases, borrowers should carefully consider the drawbacks:

Higher interest rates – Often double the rate for clean title car loans.
Large down payment required – Typically 20% to 50% down required.
Additional fees – Application fees, processing fees, and added closing costs.
Purchasing trapped equity – You take the depreciation hit rather than the previous owner.
Limited purchase protection – Gap insurance may not apply for a total loss soon after purchase.
Potential loan rejection – Many applications for salvage title loans are still declined.

Does Navy Federal Finance Salvage Titles

Navy Federal Credit Union does not offer auto loans for vehicles with salvage titles. Navy Fed’s auto financing page states they require vehicles to have clean titles not branded as salvage, rebuilt, or totaled.

This strict salvage title loan policy is common among major banks and credit unions given the increased risks. Navy Fed likely wants to avoid hidden safety concerns, lower collateral value, and higher chance of default.

Members with very strong credit scores and excellent history with Navy Federal may potentially get exceptions on a case-by-case basis. But in general, Navy Fed does not finance salvage title vehicles. Applicants will likely need to shop with smaller lenders and specialty finance companies.

A salvage or rebuilt title vehicle may not be what you think

When financing a car with a salvage or rebuilt title, it’s important to understand the potential pitfalls:

Potentially unseen damage

Even after repairs, structural damage can compromise safety in an accident. Airbags, wheels, and impact absorption may be affected.

Low or no trade-in value

Dealers offer very little, if anything, for salvage and rebuilt title trade-ins. Expect significant trade-in discounts.

Potential for “title washing”

Some use scams to remove salvage brands illegally, hiding damage history. Do a thorough title check.

May be challenging to secure financing

Most lenders view salvage loans as too risky. Interest rates are higher with those that do offer financing.

Buying a branded title vehicle can save money but research carefully to avoid expensive hidden problems down the road. Inspect thoroughly, compare loan terms, and weigh the overall risks and savings. An informed buyer is best equipped to make the right decision.

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Major banks that finance salvage and rebuilt title vehicles (Wells Fargo, Chase, etc.)

Some major banks may approve auto loans for salvage or rebuilt title vehicles in certain circumstances, but with strict requirements:

Wells Fargo

Considers applications case-by-case
Typically requires prime credit scores 700+
At least 50% down payment
Recent substantial verifiable repairs

Chase

Usually declines salvage loan applications
Rare exceptions for longtime customers with excellent credit
At least 30% down and solid collateral

Bank of America

Usually rejects salvage title applications
May occasionally approve for high-net worth clients
Credit score 700+ and large down payment

Capital One

Generally declines salvage title auto loan applications
Much higher standards than normal auto loans
Credit score 700+ and large down payment

In most cases, major banks view salvage titled vehicles as too high risk for standard auto lending. Applicants need stellar credit and substantial down payments for a chance of exception.

Personal lenders financing salvage cars and trucks

Some personal loan companies are more flexible on salvage title auto financing:

LendingClub – Requires 680+ credit score and 30% down
Prosper – 700+ credit score, 50% down payment
Avant – 650+ score, 40% down payment
BestEgg – 680+ score, $5k minimum loan

These lenders still impose high standards but may offer personal installment loans for purchasing rebuilt title vehicles that banks shy away from. Interest rates are generally higher than auto loans.

Specialty banks and credit unions financing branded / rebuilt titles

Smaller institutions focused on financing high-risk vehicles:

Second Chance Finance – Specializes in salvage/rebuilt loans
Reliable Credit Association – Bad credit salvage financing
Auto Advocates Credit Union – Up to 115% financing
Eaglemark Savings Bank – Harley-Davidson bike loans

These niche lenders cater to customers overlooked by major banks. However, their rates tend to be quite high due to the increased risks.

Dealership financing, indirect lending on salvage trucks and cars

Some dealerships offer financing assistance for their salvage inventory:

Buy Here Pay Here (BHPH) dealers – In-house financing at high rates
Franchise dealers partnering with subprime lenders
Indirect lending programs through Credit Acceptance, Westlake Financial, etc.

Dealers have more flexibility than banks but charge higher rates. They may repossess the vehicle if payments are missed. Shop carefully.

In summary, salvage title financing is very limited with mainstream lenders but possible through specialty companies, at an increased cost. Strong credit scores, large down payments, and excellent collateral improve the chances of getting approved. Let me know if you would like me to expand on any part of this additional content.

Call LightStream first for salvage or rebuilt vehicle lending

LightStream is an online lending division of SunTrust Bank that offers some of the best terms for financing salvage and rebuilt title vehicles.

Key advantages of LightStream:

Loans from $5k up to $100k
No application fees or prepayment penalties
Same day funding available
Fixed rates from 3.99% APR
Auto pay discount available

While LightStream has stricter requirements than normal auto loans, they represent one of the few options for prime rate salvage title financing through a major bank.

LightStream’s salvage title loan criteria:

Minimum 680 credit score
Sufficient income to cover payments
Clean history with SunTrust/LightStream recommended
Recent major repairs must be documented
Collateral value impacts terms

By starting with LightStream, you can potentially get better rates and terms than subprime lenders. LightStream offers a rare pathway to finance a salvage-titled vehicle without sky-high interest rates.

A Real Salvage Title Car

When shopping for vehicles with salvage titles, beware of potential pitfalls:

Verify repairs – Get a mechanic’s inspection to confirm work was done properly.
Research damage – Use the VIN to check accident history and confirm the title brand.
Assess safety – Cars with structural frame damage may not protect occupants in a crash, even after repairs.
Expect rapid depreciation – Salvage cars lose value quickly, especially in the first 1-2 years after major damage.
Limit loan amount – Don’t finance more than the current value to avoid being upside down on the loan.
Check insurability – Get quotes before purchase to ensure adequate affordable coverage is available.

Scrutinize each salvage title car carefully, get professional inspections, and make an informed decision before purchase. Never take a seller’s word for it.

A Salvage Car That Is Rebuilt

Rebuilt title vehicles can be lower risk than simple salvage titles, if repaired properly:

Verify repairs – Require documentation of the work done, parts replaced, costs.
Inspect thoroughly – Have a trusted mechanic check the car completely. Test drive extensively.
Review title history – Check for previous total loss events, not just the most recent.
Assess parts used – Were quality new OEM or certified refurbished parts used?
Consider safety upgrades – Some rebuilders upgrade with steel safety cages, extra airbags.
Get insurance quotes – Prices will still be higher but should be lower than unrebuilt salvage cars.

While still high risk, a properly repaired and inspected rebuilt title car may provide affordable transportation. But extra due diligence is mandatory before purchase.

Where to Go for a Loan

Finding financing for a salvage or rebuilt title car takes effort, but options exist:

Compare auto loan refinance rates

Online lenders like Lightstream, PenFed, and local credit unions are best options for prime rate salvage/rebuilt financing.

Ask dealers about dealer financing

Buy Here Pay Here and franchised dealers may offer in-house loans if you lack credit alternatives.

Consider a personal installment loan

Borrow from an online lender, then use funds to purchase the vehicle. Rates vary greatly.

Save up and pay cash

Given financing challenges, paying the full amount in cash may be necessary.

Pledge other assets as collateral

Lenders may extend credit if you put up additional valuable assets to secure the loan.

While traditional banks shy away from salvage title lending, casting a wide net can uncover financing sources that recognize your unique situation and creditworthiness.

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Selling Salvage Title Vehicles

Trying to sell a used car with a salvage title presents unique challenges:

Disclose upfront

Clearly state the salvage title status in all listings and communications. Hiding it is unethical and illegal.

Price appropriately

Price at least 30-50% below normal clean title values for quick sale. Most buyers expect deep discounts.

Advertise widely

Target online car resale platforms that allow branded title vehicles, like Facebook Marketplace, Craigslist, etc.

Highlight repairs

Provide repair documentation, parts invoices, and before/after photos to showcase improvements.

Offer inspections

Letting buyers thoroughly inspect the vehicle helps overcome concerns.

Prepare documentation

Have the title, repair records, inspection reports ready for potential buyers.

Expect low offers

Buyers will counter aggressively since salvage vehicles have minimal resale value. Manage expectations.

Selling privately takes persistence and pricing realistically. Consigning with a dealer may be easier but comes with steep commission fees.

How Does a Salvage Car Title Impact the Value of a Car?

A salvage title can reduce a vehicle’s value significantly:

At least 30% discount – Most buyers expect 30% or more off normal prices.
Up to 50% lower – Major structural damage may equate to 50% less value.
75-90% less for trade-ins – Dealers offer very little, if anything, for salvage trade-ins.
Rapid depreciation – The discount gets steeper as the car ages past the damage and branding.
Scrap value only after 10-15 years – Once too old, only useful for parts and scrap metal recycling.

The lack of financing options, safety concerns, and resale challenges mean salvage title cars lose value rapidly. Thorough repairs and restoration may help retain some value.

How Does Financing a Salvage Car Title Loan Work?

Financing a salvage or rebuilt title vehicle is challenging but possible through specialty lenders:

Higher interest rates – Often twice as much compared to normal auto loans.
Large down payment required – Typically 20-50% down to get approved.
Shorter loan terms – May only qualify for 24-36 month loans, not 60-72 months.
Prepayment penalties possible – Some lenders charge fees if loan is repaid early.
Additional fees – Application, documentation, processing fees on top of interest.
Collateral required – May need to pledge additional assets to secure loan.

While expensive, salvage title financing provides a path to secure transportation while rebuilding credit. Just ensure loan payments fit comfortably within your budget.

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Refinancing Salvage Title Vehicles

Refinancing a car loan can potentially lower interest rates and payments. But it is very challenging with salvage-titled vehicles.

Banks shy away from refinancing existing salvage loans due to the risks. But some options exist:

Online Lenders

The best refinance rates will likely come from online lenders like Lightstream, PenFed Credit Union, and local banks. Credit unions may offer discounts to members.

Credit Unions

Smaller credit unions may be willing to refinance a salvage loan for long-time members with excellent history.

Auto Dealers

Dealers arrange financing through subprime lenders. Rates are higher but may beat existing terms.

401k/Retirement Loan

Borrowing against a 401k balance avoids credit check. But retirement funds should be a last resort.

Home Equity Loan

Tapping home equity could provide better rates/terms than an existing salvage loan. But your house is at risk if you default.

Personal Loans

Unsecured installment loans through online lenders offer fixed terms. But they lack benefits of secured auto financing.

Refinancing is best for dropping rates on an existing salvage loan. But make sure to weigh the costs and risks carefully before taking on new debt.

Requirements for Refinancing an Auto Loan

To qualify for a refinance on any auto loan, typical requirements include:

Loan balance – Still owe a substantial amount, at least a few thousand dollars.
Loan term – 1 year or more remaining on the existing auto loan term.
Credit score – Minimum 620 score for subprime lenders, 700+ for better rates.
Income verification – Proof of employment and regular income.
Collateral – Vehicle must hold sufficient value to secure the refinanced loan.
Insurance – Must have valid auto insurance that will continue to cover the refinanced loan.
Application fee – Many lenders charge application fees of $25-$50 or more.

With a salvage-titled vehicle, requirements will be far more stringent regarding credit score, down payment, and collateral value to get approved.

The Takeaway

Salvage title cars can provide transportation at a discount but require caution.
Inspections, history reports, and mechanical vetting are mandatory before purchase.
Major repairs should be documented to ensure they were done properly.
Financing requires prime credit, large down payment, and collateral.
Refinancing existing salvage loans may provide better rates through specialty lenders.
Buyers must weigh significant risks against potential savings when considering a branded title vehicle.

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3 Auto Loan Refi Tips

If trying to refinance an existing auto loan on a salvage title vehicle, keep these tips in mind:

1. Shop multiple lenders

Compare rates and terms from at least 3 potential lenders.
Consider banks, credit unions, and online lenders.
Get pre-qualified to find the best offers without impacting your credit.

2. Look for flexible requirements

Find lenders that allow higher mileage and older vehicles.
Ask about exceptions to minimum credit score cutoffs.
Inquire if additional collateral can help offset branded title limitations.

3. Read the fine print

Review all fees—origination, application, processing, etc.
Check for prepayment penalties that limit refinancing again.
Understand interest calculations and rate change provisions.

Avoid lenders making outlandish promises of guaranteed approvals. Carefully vet all offers to make the right refinance choice.