Getting quick cash can be tempting when you need money for an emergency or to pay pressing bills. If you have a car, a title loan may seem like an appealing option even if you still owe money on the vehicle. But is it possible to get a title loan on a financed car? Let’s take a closer look at how title loans work and key factors to weigh if you’re considering using your financed vehicle as collateral.
Benefits of Title Loans
Quick Access to Cash
Title loans provide a way to get cash quickly based on the value of your car. The lender places a lien on the car title in exchange for giving you a loan. A title loan allows you to leverage your car’s equity to get funds even if you haven’t paid off the vehicle loan yet.
Eligibility
Since title loans rely on the car’s value rather than your credit score or income, they may be an option for borrowers who can’t qualify for other types of loans. The lender doesn’t run a full credit check. As long as you have equity in the vehicle, you may be eligible for a title loan.
Are You Eligible for a Title Loan on a Financed Car? It Depends on the Lender
Whether you can get a title loan on a car you’re still financing depends on the specific lender’s policies. Some lenders will provide title loans for financed vehicles, while others won’t.
Lenders need to verify you have enough equity in the vehicle to serve as collateral. They’ll appraise the car to determine its current value. The lender will then calculate the loan-to-value ratio, comparing the amount left on your auto loan to the car’s appraised value.
For example:
- You owe $8,000 left on your car loan
- Your car is appraised at $12,000
- The loan-to-value ratio is 67% ($8,000 divided by $12,000)
In this scenario, you have $4,000 in equity that could potentially be borrowed against with a title loan.
Each lender sets their own cutoff for the maximum loan-to-value ratio they’ll accept. Many require at least 20-30% equity for a title loan on a financed vehicle.
So in the example above, with $4,000 equity on a $12,000 car, the 33% equity may meet the lender’s requirements. But always check the specific lender’s policies.
Will You Have to Wait Long to Get a Title Loan on a Financed Car? Probably Not
A major appeal of title loans is fast financing. Once approved, lenders can provide funds in as little as one business day. Some even offer same day title loans.
The verification process may take a little longer than an unfinanced vehicle title loan. The lender needs to confirm details on your existing auto loan, like:
- Amount borrowed
- Interest rate
- Monthly payments
- Payoff date
After verifying this financing information and calculating your equity, the lender can complete the title loan quickly. You may be able to get cash in hand in just a day or two in many cases.
Should You Apply for a Title Loan on a Financed Car? Key Questions to Consider
While a title loan on your financed vehicle may provide quick cash, it’s important to ask yourself these key questions first:
1. Will a Title Loan Provide the Money You Need?
Remember, your borrowed amount gets limited by your available equity. With only 20-30% equity required, you may only be able to borrow a portion of what you still owe on the car. Run the numbers to see if a title loan will provide enough to meet your needs.
2. Will You Be Able to Pay Back a Title Loan on a Financed Car?
You’ll need to keep making your regular car payments plus repay the title loan. Defaulting can put your vehicle at risk. Be realistic about whether taking on another payment is feasible with your current income and expenses.
3. What Are Your Short- and Long-Term Expenses?
Consider all upcoming bills, not just the title loan payments. Make sure you can afford expenses like housing, groceries, utilities, etc.
4. What Are the Terms of a Title Loan?
Compare interest rates, fees, and payment timelines from different lenders. Avoid options with excessive rates or unfavorable repayment terms.
5. Does a Lender Meet Your Expectations?
A trustworthy lender should explain the process, provide loan details upfront, respect your personal information, and follow responsible lending practices. Don’t settle for less.
How Can You Select the Right Lender for a Title Loan for a Financed Car? Here’s What You Need to Know
Choosing the right title loan lender is key if you decide to borrow against your financed vehicle. Here are tips for picking a lender:
- Verify they loan on financed cars – Make sure the lender’s policies allow title loans for vehicles that aren’t fully paid off yet.
- Check interest rates and fees – Compare rates from multiple lenders. Lower is better. Watch out for excessive origination fees.
- Review loan terms and policies – The loan amount, repayment timeline, and default terms should be clearly explained.
- Ask about impact on your financing – Will the title loan affect the interest rate or terms of your existing car loan?
- Research reputation – Read online reviews and check for any complaints against the lender. Look for responsiveness, transparency and fair policies.
Taking the time to find the right lender can help ensure the best title loan experience if you decide borrowing against your financed vehicle is your best option.
Can You Get Title Loans on Financed Cars?
In summary, it is possible to get a title loan on a car that you’re still making payments on, depending on the lender’s policies and your vehicle’s equity. While title loans provide fast cash, consider the repayment terms and impact on your overall finances very carefully before proceeding. Comparing multiple lenders can help you select the best title loan company for your situation.
How to Calculate the Amount of Equity in Your Vehicle
To determine if you can qualify for a title loan on a financed vehicle, you’ll need to calculate your equity. Here are the steps:
- Find your payoff amount – Contact your auto financing company to get the current payoff amount remaining on your loan. This is the amount needed to own the car free and clear.
- Get the car’s value – Use the car’s year, make, model and mileage to look up the current market value. Resources like Kelley Blue Book can provide estimates. You may need a professional appraisal.
- Subtract the payoff from the value – Take the current car value and subtract the payoff amount. The difference is your equity.
For example:
- Car value: $15,000
- Payoff amount: $9,000
- Equity: $6,000
This hypothetical car has $6,000 in available equity that could potentially be borrowed against with a title loan.
- Compare to lender requirements – Check the lender’s minimum equity requirements. Many require 20-30% equity. In this example, with $6,000 equity on a $15,000 vehicle, the 40% equity would likely meet most lender’s guidelines.
Calculating your equity this way provides an estimate of how much you may be able to borrow with a title loan if other eligibility requirements are also met. Work with the lender to confirm details.
How Do I Get Title Loans for Cars Not Paid Off Yet?
If you determine you have sufficient equity, here are the typical steps to getting a title loan on a financed vehicle:
- Find a lender that allows title loans for financed cars – Make sure the lender’s policies fit your situation.
- Provide details on your existing auto loan – The lender will verify the loan balance, interest rate, monthly payments, etc.
- Allow the lender to appraise your car – The lender needs to evaluate the car’s current market value.
- Submit required documents – This usually includes proof of ID, car registration, insurance, and income.
- Accept the loan terms – The lender will offer loan terms based on your equity. Make sure you understand and agree to the amount, fees, rate and repayment timeline before accepting.
- Receive the loan – Once approved, the lender can disburse funds as quickly as the same or next business day.
- Make payments – Be sure to continue making your regular car loan payments in addition to repaying the title loan.
Follow through on the lender’s verification steps to get the process moving as quickly as possible. Ask questions if anything is unclear before signing.
What Happens When I Use a Financed Car as Collateral?
When you use a car with an existing loan as collateral for a title loan, here’s what happens:
- The title loan acts as a separate second loan alongside your original auto loan.
- The title lender places a lien on the vehicle title, but your name still appears as the legal owner.
- You keep possession of the car and can continue driving it.
- You must continue making payments on your original car loan to avoid default.
- You also make payments to the title lender as outlined in your title loan agreement.
- When the title loan gets repaid in full, the lien gets removed.
- If you default on the title loan, the lender may repossess the vehicle and sell it to collect what you owe.
Using a financed vehicle as title loan collateral allows you to leverage the car’s equity for cash, but also adds the responsibility of another loan payment. Manage both loans carefully to avoid putting your vehicle ownership at risk.
What Do You Need to Get a Car Title Loan While Still Making Payments on Your Car?
To qualify for a title loan on a vehicle you’re still financing, here are the main requirements:
- Lien-free title – Even if you owe money, as the registered owner you hold the vehicle’s title.
- Sufficient equity – The lender will check you have adequate equity available to serve as collateral based on the car’s value.
- Valid photo ID – Proof of identity such as a driver’s license.
- Income verification – Pay stubs or bank statements to confirm your income.
- Residence proof – Documents confirming your local residency.
- Car registration – Current vehicle registration in your name.
- Insurance documentation – Proof of current auto insurance coverage.
Bringing items like your driver’s license, pay stubs, car title, registration and insurance documents can speed the application process. Having enough equity is key to getting approved.
How Much Can You Get if You Use a Financed Car as Collateral for a Title Loan?
The amount you can borrow against a financed vehicle depends on:
- The car’s appraised value – The lender will assess the current market value. Higher appraisals allow larger loans.
- Your available equity – The lender will only lend based on your equity. With 20% equity, you may borrow around 80% of the car’s value.
- The lender’s policies – Maximum loan-to-value ratios vary. Some lenders cap loans at 50% or less of the car’s value.
For example:
- Car value: $20,000
- Equity: $8,000
- Lender’s max: 50% loan-to-value
Here you might be approved for around $10,000 (50% of $20,000). But a different lender could potentially approve more or less depending on their policies.
The best way to estimate your potential loan amount is to work directly with the lender. Be sure to also consider whether monthly payments will fit your budget prior to accepting the loan.
Conclusion
Getting a title loan on a car you’re still financing is possible depending on factors like your equity and the lender’s policies. While title loans provide fast cash, make sure you understand the repayment terms and potential risks before signing. Carefully consider whether taking on another loan payment fits your current financial situation.
With the right preparations, a title loan could provide temporary assistance, but other options like paying off your current auto loan early or consolidating debt may be better long-term choices. Do your research to make the most informed decision.
