Are you struggling with financial challenges and need fast access to cash?
When unexpected expenses strain your budget, your car can be more than just a way to get around. It can also be a smart way to access quick cash when you need it most.
An auto equity loan allows you to borrow money based on your vehicle’s value and your income while you continue driving it.
Even with bad credit, you may still qualify for up to $50,000 in funding, giving you fast financial relief without giving up your car. If this sounds like the right solution for you, apply for a free estimate or keep reading our guide to learn more.
Key Takeaways:
- Borrow Against Your Vehicle Equity: Use your car’s equity as collateral to access money quickly.
- Keep Driving Your Car: The lender only holds your vehicle title, not your vehicle.
- Bad or Good Credit Accepted: Approval depends mainly on equity, income, and repayment ability, not just your credit score.
- Flexible Repayment Terms: Choose a loan term with predictable monthly payments that match your financial situation.
- Lower Interest Rates: Because you require collateral, rates are often lower than unsecured personal loans or payday loans.
What Is an Auto Equity Loan?
An auto equity loan is a type of secured loan that lets you borrow money based on the equity in your vehicle while you continue driving it. Equity is the portion of your car’s current value that you truly own, your car’s worth minus any existing auto loan balance.
With an auto equity loan, the vehicle title acts as collateral, and the lender temporarily holds it until you repay the loan in full. You receive a lump sum of cash upfront and make fixed monthly payments over an agreed loan term.
These loans are popular with borrowers who have significant equity in their cars and need quick cash for emergencies, medical bills, home repairs, or high-interest debt payoff. Because it’s a secured loan, it’s typically easier to qualify for than unsecured loans or a personal loan.
How Does an Auto Equity Loan Work?
When you apply, the lender will check your car’s current market value and any existing loan balance to determine how much equity you have.
Example
If your vehicle is worth $18,000 and you owe $5,000 on your current auto loan, your available equity is $13,000. You may be able to borrow up to 50% of that, depending on the lender and your credit profile.
You’ll then agree to a loan term (usually 12–48 months) with a fixed interest rate or sometimes a variable rate. Once approved, funds are deposited directly into your bank account, often within one business day.
Understanding Equity in Your Car
Your equity represents the portion of your car you truly own.
To find how much equity you have:
- Use a vehicle valuation tool (like Kelley Blue Book).
- Subtract your loan balance from the current value of the vehicle.
If your car is worth $15,000 and you owe $7,000, you have $8,000 in vehicle equity. This equity in your car determines the maximum loan amount available.
The higher your equity, the more you can access funds through a vehicle equity loan.
Eligibility Requirements
To qualify for an auto equity loan, you’ll typically need:
- A car with significant equity or owned car outright.
- A vehicle title in your name.
- Proof of income showing you can handle loan payments.
- Valid insurance on the vehicle.
- A bank account for direct deposit.
- A government-issued ID and proof of residence.
Some credit unions and online lenders also require a minimum credit score, but many will still offer auto equity loans to borrowers with bad credit.
Advantages of Auto Equity Loans
- Quick Cash Access: Get approved fast and access money for emergencies.
- Lower Interest Rates: Compared to unsecured personal loans, rates are lower because you require collateral.
- Flexible Loan Amount: Borrow up to 50% of your car’s value.
- Predictable Monthly Payments: Enjoy fixed monthly payments with a fixed rate or fixed interest rate option.
- Keep Using Your Car: Maintain full vehicle use while repaying.
Drawbacks to Consider
- Repossession Risk: If you can’t repay the loan, the lender can repossess your vehicle.
- Limited Loan Amount: You can only borrow up to your vehicle equity, not the full car value.
- Fees and Costs: Origination fees and early payment penalties may apply.
- Higher APR Than Home Equity Loans: Since cars depreciate faster, auto equity loans have higher rates than a home equity loan.
Auto Equity Loan vs. Title Loan
Although both use your car as collateral, a title loan usually requires full ownership with no existing loan.
An auto equity loan, however, can still be obtained if you have a current auto loan and equity remaining.
Auto equity loans tend to have longer loan terms, lower interest rates, and more flexible monthly payment options than auto title loans. Title lenders often charge higher rates and shorter loan periods.
Auto Equity Loan vs. Personal Loan
A personal loan is an unsecured loan, meaning no collateral is required. While this can simplify approval, it also results in higher interest rates.
An auto equity loan offers lower interest rates because it’s a secured loan, making it easier for people with lower credit scores to qualify. However, if you default, you risk your car, something that doesn’t happen with an unsecured personal loan.
Auto Equity Loan vs. Home Equity Loan
A home equity loan works similarly to a vehicle equity loan, except it uses your home instead of your car as collateral.
While a home equity loan can offer larger amounts and longer loan terms, it takes longer to process and involves more paperwork.
If you need quick cash or want to avoid risking your home, an auto equity loan is often a faster, safer option.
Alternatives to Auto Equity Loans
If an auto equity loan doesn’t fit your financial goals, consider these auto equity loan alternatives:
- Auto Loan Refinance: Lower your interest rate or change your loan term to reduce your monthly payment.
- Unsecured Personal Loan: Ideal if you don’t want to require collateral.
- Credit Unions: Many credit unions provide vehicle loans and small equity loans at competitive lower interest rates.
- Traditional Loans: Some banks offer auto equity loans or vehicle equity loans as part of their secured lending products.
- Car Title Loans: These loans require full ownership and use your car title as collateral but typically have higher interest rates and shorter repayment periods.
Frequently Asked Questions
How Much Is a $30,000 Equity Loan?
The loan amount you qualify for depends on your equity and credit score. For example, a borrower with good credit might receive 80–90% of vehicle equity at a lower interest rate, while someone with poor credit might receive 50–60%.
So, a $30,000 equity loan could give you around $15,000–$25,000 in cash, depending on your credit profile, financial situation, and actual loan terms.
What Credit Score Is Needed for a $40,000 Auto Loan?
For a $40,000 auto loan, most lenders prefer a credit score of 660 or higher. However, since an auto equity loan is secured, you may still qualify with lower scores if you have enough equity in your vehicle and steady income.
Credit unions and online lenders often offer more flexibility for borrowers with subprime scores.
Can I Use My Car as Equity for a Loan?
Yes, if you have equity in your car, you can use it to borrow money through a vehicle equity loan.
Your car title serves as collateral, and the loan amount will be based on your car’s current market value and loan balance.
This makes it possible to get quick cash while keeping your car outright during the loan period.
Is an Auto Equity Loan a Good Idea?
An auto equity loan can be a smart choice if you:
- Need access funds quickly for emergencies.
- Have equity in your vehicle and want to avoid high-interest rate credit cards.
- Prefer predictable monthly payments over short-term payday loans.
However, it’s essential to carefully review all loan offers, interest rates, and terms to ensure the loan supports your financial goals and repayment ability.
Tips to Get the Best Loan Offer
- Compare Multiple Lenders: Evaluate banks, credit unions, and online lenders.
- Check Your Equity: Use a vehicle valuation tool to estimate your car’s current market value.
- Carefully Review Terms: Understand the loan term, interest rate, and repayment schedule.
- Borrow Only What You Need: This helps reduce risk and manage loan payments easily.
- Maintain Good Credit Habits: Making on-time monthly payments builds your credit profile over time.
Final Thoughts
A car equity loan or auto equity loan is a practical way to access money fast without selling your vehicle.
With lower interest rates, flexible loan terms, and predictable monthly payments, it’s a convenient solution for short-term financial needs.
Before applying, compare loan offers, verify your equity, and ensure you can repay the loan comfortably. When used responsibly, a vehicle equity loan can provide the financial breathing room you need while keeping you in the driver’s seat.