Though easier to qualify for if you have bad credit, they can get expensive.
Finova Financial Auto Equity Loans
Short-term loans secured by your car title. Repayments accepted through MoneyGram if you don't have a bank account.
- Loan amounts: $750 to $5,000
- More time to repay
- Multiple payment options
- Requirements: Must live in AZ, CA, FL, NM, SC, TN or OR. Must own your car outright.
What’s an auto equity loan?
An auto equity loan is a type of secured loan geared to bad-credit borrowers that uses your car as collateral. It’s similar to a home equity loan in that you don’t always need to fully own your car to qualify. However, they’re typically more expensive and meant for emergency situations.
How much you can borrow is based on two main factors: the amount of equity you own in your car and its fair market value. So if you have a car with a fair market value of $10,000 and you’ve paid off 80% of your car loan, you can borrow up to $8,000.
Can I qualify for an auto equity loan?
You might not need good credit to qualify for an auto equity loan, but that doesn’t mean lenders don’t have other requirements you need to meet. Generally, you must:
- Have a car registered in your name. You don’t necessarily need to fully own the car, but it must be in your name if you want to borrow against it.
- Provide proof of income. Typically lenders ask to see your two most recent pay stubs as proof.
- Have comprehensive and collision car insurance. Many auto equity loan providers require you to sign up for comprehensive and collision insurance for the length of your loan term.
Some online lenders might not require you to have a bank account to get an auto equity loan, but many do. If you’re looking for a loan and don’t have a checking account, reach out to your lender to make sure you’re eligible before you apply.
Compare auto equity and auto title loans
Where can I find an auto equity loan?
Thinking of getting an auto equity loan? You might want to start by looking in one of these places first.
Online lenders like Finova Financial tend to be the fastest and most streamlined option for auto equity loans. However, they can be more expensive than other types of lenders.
On top of this, not all online lenders can lend in all states, so check that you’re eligible before you apply.
Local banks and credit unions
While you might not find an auto equity loan at big international banks, many credit unions and local banks offer them. They can sometimes be less costly than online lenders, though the application process might take longer.
Many offer online applications, but some might require you to come in to sign your loan documents. And if you borrow from a credit union, you’ll have to become a member and open a savings account, adding another step to the process.
How much does an auto equity loan cost?
Auto equity loans aren’t always cheap, though the costs vary depending on your lender. Local banks and credit unions can offer auto equity loans with rates as high as 36% APR, and online lenders can get as high as 500% APR.
On top of interest, auto equity loans often come with fees, including:
- DMV lien fee: $28 to $33. The DMV charges a fee each time you add a lien to your car’s title, which is what you’re doing when you borrow against your vehicle. How much it costs varies depending on your county, and not all lenders cover this cost.
- Documentary stamp tax: Varies by state and value of vehicle. On top of the lien fee, you might have to pay a tax for placing a lien on your car’s title.
- Extension fees: Varies by lender. Some online lenders allow you to extend your loan if you can’t pay it off by the time it’s due — or risk losing your car.
Auto equity vs. auto title loans
Auto equity loans and auto title loans are very similar. So similar, in fact, that some lenders use them interchangeably. Both are quick financing solutions that allow you to borrow against the value of your car. You don’t need to have good credit to qualify for either, and your lender can repossess your car if you’re unable to make payments.
But there is one main difference. To get an auto title loan, you need to fully own your car and not have any liens on it. For an auto equity loan, that’s not always the case — though some lenders like Finova require full ownership. Auto title loans also typically have terms as short as 30 days.
Auto title loan regulations vary by state — and they’re prohibited altogether in some areas. Auto equity loans may be more widely available.
Advantages and disadvantages of auto equity loans
Not sure if an auto equity loan is right for you? Weigh the benefits and drawbacks to help you decide.
- It’s easy to qualify. Most auto equity loan providers accept poor-credit borrowers since you’re putting up collateral.
- You don’t need to fully own your car. You can still get an auto equity loan even if you haven’t fully paid off your car loan.
- Longer loan terms than other bad-credit options. Longer terms can give you more affordable repayments than you’d have with a short-term loan, making it less of a risk that you’ll default. However, you’ll pay more in interest in the long run.
- You could lose your car. If you rely on your car to get to work or school on a regular basis, taking out an auto equity loan might not be worth the risk.
- It can be expensive. With APRs topping 500% with some online lenders, auto equity loans aren’t the cheapest form of financing out there.
- Extra fees. On top of the fees involved in taking out a lien on your car, some online auto equity loans come with renewal fees if you can’t afford to pay off your loan when it’s due.
Should I consider refinancing?
If you already have a title loan that you’re struggling to pay off, you might want to refinance it instead. Refinancing involves taking out a new loan to pay off your current loan, ideally with more favorable rates and terms. But even if you’re unable to qualify for more competitive rates, refinancing could help lengthen your loan to make repayments more affordable.
When you’re still paying off a car loan and have bad credit, an auto equity loan could be a quick way to get cash for an emergency expense. But it’s not without risk. You could lose your car and damage your credit if you’re unable to pay it off.
Before you sign up, check out your other short-term loan options first.
Frequently asked questions