How Much Can I Get for the Equity in my Car by Denver Templeton
What is Car Equity?
When referencing car loans, you've probably heard equity tossed around. Equity is the difference between the value of the car and the amount owed on the car loan.
It's possible to have negative equity, too. This means you owe more money than what the car is actually worth. This is also referred to as being in an upside down auto loan.
How to Use Equity
Some financial institutions give you the chance to use the equity in your vehicle when offering a loan. You get an auto loan for the value of the car and use the money for another expense, or two. In some cases, this proves to be helpful because car loans typically have lower interest rates than other types of loans or credit cards. Equity is also a good option to consider when paying down debts like credit cards balances or other loans.
In order to use your vehicles equity, you would need to refinance your car. And, if you have an existing car loan, you would need to work with your financial institution to apply for new loans. If approved, the existing auto loan will be payed off. Then, the equity would be deposited into your account. If you do not have a loan on the vehicle, you might be able to finance the full value of the vehicle.
Amount Needed to Get Equity for Your Car
The amount you need can get for the equity of your car varies for different loan providers and your ability or capacity to repay the loan. The equity of your car is determined by the current market value of the car and it is on this value that you will know how much you can get when you apply for an equity loan with your car.
Most lenders will loan up to 50% of the equity in your car and it could be more depending on your source of income and how the lender evaluates your capacity to repay the loan.
To determine your car equity, you need to know the current balance of your car and the actual value of your car. If your car is worth more than the outstanding balance you are owing, then it has a positive equity. However, if your car worth is less than the amount you owe on the car, then it has a negative equity. Your car equity is the amount of the car you own in monetary value.
Where to Find Auto Equity Loans
Most local banks and some credit unions offer auto equity loans. The rates for these loans will ultimately depend on your credit score, credit history and car value.
The four largest banks - BofA, Chase, Citibank and Wells Fargo do not offer auto equity loans, but some smaller banks do. You might want to consider other ways to borrower against your car:
- Auto Loan Refinancing
- Auto Title Loans
It's highly advised you work on rebuilding your credit score and minimizing your debt. In doing so, you'll give yourself broader opportunities or more financial chances down the line if need be. Read more about auto equity from https://www.nerdwallet.com/blog/loans/auto-equity-loans/.
