3 top-rated vehicle collateral personal loans
If you are seeking a loan but, for any reason, need to avoid traditional products, you might want to explore options such as secured financing.
For those who own a car, another alternative is a vehicle collateral personal loan, allowing you to secure financing against the value of your car.
Some lenders require that you hold the title of your vehicle to qualify for personal loans with a car as collateral.
Others will qualify you based on the amount of equity you've got in the car. In that case, the amount of the loan is likely to be commensurate with the equity you've attained in the vehicle.
Although a borrower’s credit is always at stake, a vehicle collateral personal loan raises the stakes. If things go south, you could lose your car. On the plus side, because the borrower is shouldering more risk, the loan terms should be more attractive.
Despite the risks, this kind of loan can be a lifesaver when money is tight and other options aren't available.
Why choose personal loans with car title as collateral
If your credit score is less than stellar, or you’ve maxed out your credit ceiling with lenders, using your car as collateral could also be a good option for you.
These loans should increase your chances of getting approved for a personal loan. And depending on the value of your vehicle, it can also bolster the amount you qualify for.
On top of that, personal loans with a car title as collateral will generally fetch better interest rates considering the lender has recourse if the borrower fails to make payments.
Annual percentage rates (APRs) will vary, but can range anywhere from 3% to 36%, depending on the lender. As with any loan, the better a borrower’s credit, the more attractive the interest rate they should receive.
Nevertheless, a vehicle collateral personal loan isn’t something you’ll want to take lightly considering the risks, chief among which is that a lender can repossess your car if you default on payments.
In this article, we'll dive into some of the options available for personal loans using car collateral.
Upgrade
Upgrade is a lender that offers both secured and unsecured loans to consumers. Among its secured products are personal loans using car collateral so borrowers might receive a better interest rate.
Upgrade targets borrowers with FICO credit scores in the fair category, ranging between 580 to 669.
If you want to go this route, you’ll have to provide details about your vehicle, including the car’s year, make, model, and mileage. Upgrade will collect that information to determine the size of a personal loan.
If you receive a green light, you’ll have to submit the vehicle’s title before you receive any funds in your account, which is usually one business day from the date the loan is approved.
Expect to pay fees for a vehicle collateral personal loan by Upgrade, including origination fees of anywhere between 1.85% to 9.99%, which are taken directly from the lump-sum loan amount.
If you are late on your payments, Upgrade tacks on an additional fee of $10 following a 15-day grace period. If you want to pay off your loan early, there are no early payment fees.
On Trustpilot, Upgrade has earned 4.5 out of 5 stars. Satisfied customers found the process to be fast and easy and found the customer service representatives to be helpful and friendly, saying that the funds were in the account in a day.
Upgrade also has some repeat customers. There are some complaints, however, about a lack of transparency and high interest rates.
OneMain Financial
OneMain Financial is meant for borrowers on the lower side of the FICO credit score spectrum, generally in the poor to fair category.
Considering that OneMain targets borrowers with credit scores below average, often 579 or lower, it specializes in secured loans, including personal loans using car collateral.
Personal loans using your car as collateral with OneMain require a first lien on the vehicle that must be titled in the borrower’s name. The borrower must also have insurance on that vehicle and meet the lender’s loan-to-value standards.
Unfortunately, OneMain isn’t known for offering better interest rates in exchange for vehicle collateral. APRs are in the double-digit percentage area and can range anywhere from 18% to nearly 36%.
Loan amounts can range anywhere from $1,500 to $20,000, depending on the value of the vehicle securing the loan. Terms can be anywhere from 24 months to 60 months in duration.
On fees, OneMain charges origination fees that differ based on the state but start at $25. If you are late on a payment, expect to pay a fee of $30 or as much as 15% of the payment amount, depending on the state in which you reside.
On TrustPilot, OneMain Financial has earned 4.8 out of 5 stars. Borrowers generally find the loan process simple and fast while customer support is knowledgeable and friendly.
Unsatisfied customers document an onerous experience with more paperwork than expected and suggest only going to OneMain if you are in a desperate situation.
Yendo
Yendo is a financial technology (fintech) company that issues credit cards secured by the value of a borrower’s vehicle, not their credit score. This is quite similar to personal loans with a car as collateral except the funds are delivered by way of a credit card.
Yendo supports loans up to $10,000 in credit with a fixed interest rate APR of 29.88% attached. To qualify, the vehicle title must be in the borrower’s name.
Upon approval, borrowers gain access to a credit card through which they can build their credit.
Credit lines range from $450 to $10,000. The company says that taking the car backing the loan is their last option and they will try to work with borrowers who may be struggling to make payments.
When you pay off your Yendo balance, you receive your vehicle title back. Yendo charges a $40 annual fee.
On the App Store, Yendo has earned 3.5 out of 5 stars. Most of the complaints are about a glitchy app and some hidden fees for carrying a balance.