Can i Get a Title Loan on a Financed Car

As a consumer with an existing auto loan, you may wonder if obtaining a title loan using your vehicle as collateral is possible. The short answer is yes, getting approved for a title loan on a financed vehicle is possible, but there are some essential requirements and considerations to keep in mind. Title lenders typically require you to own a certain percentage of equity in the vehicle, usually around 50% or more of the current market value. They will also want to confirm details about your existing auto loan to ensure the numbers add up and you have enough equity for their loan. If approved, the title lender will work directly with your auto lender to secure the title during the life of the loan. While title loans on financed vehicles are riskier, many lenders are willing to work with consumers in this situation with the proper precautions and verifications in place.

Understanding Title Loans and How They Work

To qualify for a title loan using your financed vehicle as collateral, you must meet a few requirements.

Documentation Needed

You must provide documentation proving you own the vehicle outright or are still making payments. Acceptable documents include:

• The original vehicle title in your name
• Current vehicle registration
• Proof of insurance
• Loan payoff statement (if applicable)

Vehicle Requirements

The vehicle must meet certain standards to qualify as collateral:

• Must be less than 10 years old
• Have less than 150,000 miles
• Be in good working condition
• Blue book value must be higher than the loan amount requested

The Loan Process

1. Gather the required documentation and bring it to a title loan lender. They will appraise your vehicle to determine its value.
2. You will fill out an application providing personal details and the requested loan amount. The lender will evaluate if you qualify based on your income and ability to repay.
3. If approved, you will sign a loan agreement stating the terms like interest rate, due date, default terms, etc. The lender will hold your title until the loan is repaid.
4. Make payments on time to avoid late fees and defaulting on the loan which could result in losing your vehicle.
5. Once the balance is paid off, the lender will return your title and release their lien on the vehicle.

Following these steps and meeting the requirements can help ensure your financed vehicle is approved to be used as collateral for a much-needed title loan. Be sure to borrow only what you can repay to avoid complications.

Is It Possible to Get a Title Loan on a Financed Car?

Getting approved for a title loan when you have an existing car loan can be challenging, but it is possible depending on your situation and the policies of different lenders. As the borrower, you will need to meet certain eligibility criteria to qualify for a title loan on a financed vehicle. The most important factor is having enough equity in the vehicle, which is the difference between your vehicle’s current market value and what you owe on your existing auto loan. The higher your equity, the more you may be able to borrow. You will also need to provide documentation verifying your income and ability to repay the loan. Some title lenders may approve you for a second lien on the title, meaning they hold a claim to the title until the loan is repaid in full. However, not all lenders offer this option, and those that do typically charge higher interest rates to account for the additional risk. It is best to shop around at different lenders to compare your options. If approved for a title loan, the lender may require you to continue making payments on your original auto loan. You would then also be responsible for repaying the title loan, including any interest and fees, typically within 24 months. Failure to repay the title loan could result in the lender repossessing your vehicle to recover their loss.

As an alternative, you may want to consider other options for fast cash like a personal installment loan, cash advance, or borrowing money from friends and family. While a title loan may seem convenient, it often comes with risks and high costs that can trap you in a cycle of debt. Carefully consider your situation to make the choice that is right for you.

Steps to Get Approved for a Title Loan on a Financed Vehicle

To get approved for a title loan on a vehicle you still owe money on, follow these steps:

Check Your Vehicle’s Equity

Your vehicle’s equity will determine if you qualify for a title loan and how much you can borrow. Equity is the difference between what you owe on the vehicle and its current market value. Lenders typically allow you to borrow a percentage of your equity, often between 25 to 50 percent. You will need to provide details on your vehicle like the make, model, year, mileage, condition, and your loan balance to get an estimate of your equity and loan amount.

Gather Required Documentation

To apply for a title loan on a financed vehicle, you will need to provide certain documentation to the lender, including:

• Vehicle title or registration showing you as the legal owner.
• Government-issued ID like a driver’s license.
• Proof of income such as recent pay stubs, bank statements, tax returns, or other financial documents.
• Details of your existing auto loan like your account number, lender’s name and address, monthly payment amount, interest rate, and loan balance.

Apply for the Title Loan

You can apply for a title loan on a financed vehicle online, over the phone, or in person at a lender’s storefront location. Be prepared to provide the necessary documentation to verify your information. The lender will evaluate your application and may charge an origination or documentation fee. If approved, the loan amount you qualify for will depend on the equity in your vehicle and your ability to repay the loan.

Repaying the Loan

A title loan on a financed vehicle typically has a short repayment term of 30 days to 24 months. You will need to make monthly payments to repay the interest and principal. Your vehicle title secures the loan, so failure to repay the loan can result in the loss of your vehicle. Be sure you understand all terms and conditions before borrowing against your vehicle’s equity.

With some lenders, getting approved for a title loan on a financed vehicle is possible if you meet their eligibility criteria. Follow the proper steps, determine how much you can borrow based on your vehicle’s equity, and ensure you can afford the loan payments to avoid defaulting and losing your vehicle.

Finding the Right Title Loan Lender

To get approved for a title loan on your financed vehicle, you’ll need to find a title loan lender that works with cars that still have an existing lienholder. Not all title loan companies provide loans on financed cars, so you may need to shop around at a few places.

Check Loan-to-Value Requirements

The loan-to-value ratio (LTV) refers to the percentage of your vehicle’s value that the lender is willing to lend you. For financed cars, the LTV will typically be lower, around 50-70% of the vehicle’s value. This is to account for the fact that another lender still holds the title. Ask about the lender’s specific LTV requirements for financed vehicles to make sure they will lend you enough based on your vehicle’s value.

Review Interest Rates and Fees

Title loans for financed vehicles often come with higher interest rates due to the additional risk to the lender. Rates can vary between lenders, so compare rates from different companies. Also ask about any additional fees, like origination fees or monthly servicing fees. Make sure you understand the total cost of the loan including all interest and fees before proceeding.

Check Lien Payoff Requirements

Some title loan lenders will require that you pay off your existing auto lien before they will release the title loan funds. Others will pay off your lien themselves and add that amount to your total title loan balance. Ask about the lender’s policy on paying off liens and make sure you understand any additional costs involved before taking out the title loan.

Consider a Lienholder’s Permission

Some lienholders may not allow you to take out a title loan on a vehicle you’re still paying off. Contact your lienholder to ask if they allow title loans and to get their permission in writing before proceeding with a title loan. This can help avoid potential legal issues down the road.

You can find a lender that will work with your situation by doing thorough research on title loan companies and their specific requirements for financed vehicles. Make sure to compare costs and lienholder policies across different lenders to get the most affordable title loan option possible given your circumstances.

Tips for Managing Your Title Loan Responsibly

Once you have obtained a title loan on your financed vehicle, it is important to manage it responsibly to avoid potential issues. Here are some tips to keep in mind:

Make Payments On Time

The most important thing is to make your payments on time according to the schedule in your loan agreement. Late or missed payments can result in additional fees and interest charges, and in severe cases can lead to default and repossession of your vehicle. Stay on track with payments to avoid these scenarios.

Don’t Default

Defaulting on your title loan can have serious consequences, including repossession of your vehicle. Make sure you understand the terms of your loan agreement and do everything in your power to avoid defaulting. If you are having trouble making payments, contact your lender as soon as possible to discuss options for modifying or extending your loan. It is always better to communicate with your lender before missing payments.

Avoid Additional Fees

Title loans often come with high interest rates and various fees like lien release fees. Make extra payments when you are able to reduce the principal faster and avoid paying more in interest charges. Also, pay the loan off as quickly as possible to avoid renewal fees if it goes past the initial loan term. The shorter the loan term, the less you will pay in fees and interest.

Don’t Use the Vehicle as Collateral Again

Once you have paid off your title loan, do not use that same vehicle as collateral for another title loan. This can become a dangerous cycle of debt that is difficult to break free from. If you need money again in the future, explore other options like personal loans, credit cards, or borrowing from friends/family before taking out another title loan.

By following these responsible tips for managing your title loan, you can minimize fees and interest charges, avoid default and repossession, pay the loan off quickly, and break free from the title loan cycle of debt. Stay on track and communicate with your lender for the best results.

Conclusion

As you have learned, obtaining a title loan while still owing money on your vehicle can be tricky but is possible if you find the right lender and take the proper steps. By researching lenders thoroughly, providing complete transparency about your lien, and potentially offering a substantial down payment, you increase your chances of getting approved and securing funds quickly when you need them most. While a title loan is not ideal and should only be used as a last resort, knowing you have options to gain access to cash during a financial emergency can provide peace of mind. With some legwork and by following the tips outlined here, you can navigate the process smoothly and come out the other side with a title loan to bridge the gap until your situation improves.