Car Title Loan on a Financed Car: What You Need to Know
A title loan is a common option for those needing fast cash. You can apply for a title loan, also known as an auto title loan, in person or online, which is usually funded in hours, not days. Getting a title loan does not require a good credit score because there isn’t a credit check when you apply for one. All you need for a title loan is a car you own, which must have a lien-free title. There is an option to take account: a title loan on a financed car
However, this does rule out those still paying off their auto loans. What can you do if you need money but you haven’t finished paying off your car yet? Fortunately, there are still lenders out there who will issue you a title loan, although, in this case, it will be an auto equity loan. Here’s everything you need to know about getting a title loan on a financed car.
Auto Equity Loans: How a Car Title Loan on Finance Car Differs from Regular Title Loans
Because you’re using your car as collateral to secure car title loans, the lender will first calculate the current market value of it using a vehicle value guide and its condition. They will then set a maximum loan amount they can issue you, which will be a portion of your car is worth.
For example, let’s say that you have a car with a current market value of $20,000. It’s common for lenders to loan up to 25 to 50 percent of a car’s value with a title loan, which means the lender may be willing to loan you $5,000 to $10,000. In some states, there are also title loan amount limits, such as $2,500 or $5,000, but title loan requirements in Texas don’t put any cap on amounts
It will obviously work differently if you haven’t paid off the car in full yet, and as the name suggests, a title loan on a financed car is based on the amount of equity you’ve built up in your car. For example, you purchased a $30,000 and put $8,000 down. You’ve now made $7,000 in payments, leaving you with a loan balance of $15,000.
Positive equity is the amount by which your car’s market value exceeds the outstanding loan balance, which is crucial for loan eligibility.
During that time, the car also depreciated and was now worth $20,000. You have $5,000 of equity in the car, and using the same 25 to 50 percent amount, the lender will likely be willing to loan you $1,000 to $2,500.
The potential problem you could run into is if your car has depreciated faster than you’ve paid off your loan, in which case you won’t have any equity. This makes getting a secured loan, such as a title loan on a financed car, more difficult.
There are lenders who are more flexible regarding lending you money even if you haven’t built up equity in your car. Still, it’s always better to have equity in the car before you take out a loan against it.
More Info About Title Loan on a Financed Car
Even though a title loan on a financed car works slightly differently than regular title loans, they still fall under the same classification regarding the law. They must adhere to the same federal and state regulations as title loans, and title loans on financed vehicles operate similarly to standard title loans.
Title loan companies must adhere to these regulations to ensure fair lending practices. Title loan lenders focus more on the vehicle's value and the borrower's repayment capacity rather than credit scores.
How Does a Title Loan on a Financed Car Work in Texas?
According to federal law, every title loan borrower must be at least 18 years old. However, almost all title loan regulations occur at the state level. Texas is fairly hands-off regarding state title loan regulations, allowing lenders and borrowers to set up a title loan on a financed car agreement.
Title loans are intended to be short-term loans. Texas sets a limit of 180 days on title loan contracts, but most lenders will go with terms of 30 days. This is true both in Texas and other states across the nation. You can shop around for lenders offering competitive interest rates and to acceptinstallment payments for title loans , but that may be hard to find.
and to accept installment payments for title loans, but that may be hard to find. The full title loan payment is due when the term is up, but you can extend your title loan on a financed car if you can’t pay it off in full. How do you do this? It’s simple, all you need to do is pay whatever you currently owe in interest and fees.
This will be much less than the full loan amount, but you will be charged additional interest and fees when you extend the title loan on a financed car into a new term. Since the term limit in Texas is 180 days, you’ll need to pay your title loan in full when you reach that limit.
Although extending your title loan costs you more, this is a better option than defaulting. If you default, the lender has the right to repossess your car. This is true with both title loans and a title loan on a financed car.
Texas doesn’t require the lender to wait any specific period after you default to repossess your car, meaning repossession could occur immediately or a few days later.
What Happens If Your Car Is Repossessed?
When a lender repossesses a car for a title loan, they typically just sell it unless the borrower is able to catch up on what they owe. The process can be a little trickier for them when the car is still being financed and hasn’t been paid off yet.
They may need to negotiate with the financing company about the existing auto loan. From your perspective, you won’t have a car and will still be financially obligated to pay your auto loan. Getting your car repossessed is bad enough with title loans, but it’s far worse with title loans on financed cars. You’ll be making payments for a car that you don’t have anymore.
Texas Approval: A Title Loan With Financed Car Near Me
Whether you’re getting a title loan on a financed car or a car you own outright, you should ensure you plan to pay it back in full. Maybe you’ll receive a financial windfall through a tax return or a bonus at work.
A ChoiceCash title loan offers a convenient and flexible application process for those with financed cars.
Make sure to choose a reputable title lender to avoid any potential issues.
Or perhaps you plan to work extra hours of overtime. Whatever it is, you need to know how you’ll repay what you borrow. Far too many people get the title loan first with no idea of how they’ll repay it. This leads to them paying more in interest and fees as they extend their loans.
It’s never easy when you’re dealing with a financial emergency, but don’t let it cloud your judgment and get a loan you can’t pay back.
Getting a title loan on a financed car is possible, although finding a lender who will issue your loan can be more difficult. We have lenders in our network who can offer this title loan with financed car online, though, and can connect you with one if that’s what you need. Even though you don’t own the car, the loan will work about the same as a title loan.