A car is considered an asset and a convenient mode of
transportation for many. No wonder it's rapidly becoming an
absolute necessity to own a car these days. Many people take
out a secured loan to get a car and then pay it off with
monthly installments. In addition, there are also people who
use the equity in their vehicle to borrow money if they need
it.
Did you know you can use your car's equity to get the money
you need? Read on to learn what car equity is and how can
maintaining equity in your vehicle benefit you.
What Is Equity in a Car?
In simple words, Car Equity can be defined as the portion of
the vehicle you own while you’re making payments on your car
loan. If you’ve paid off the car loan in full, the vehicle’s
entire value becomes car equity.
The equity in a car can be either represented in dollar
terms or the percentage of your vehicle's current market
value. Let’s say your car’s current value is $24,000, and
you have an outstanding loan balance on the same vehicle for
$20,000. Here the car equity is $4,000 or 16.67% of the
car's current resale value.
How To Calculate Your Car's Equity?
When you borrow a loan to buy your car, you start making
loan payments to get full ownership of the vehicle. As you
keep paying the loan payments, you start gaining partial
ownership of the car for the amount you’ve paid. This
portion is the equity and can be easily calculated in
monetary value.
Knowing your car’s equity can be helpful when you need money
in an emergency. Remember if you have a
financed car, it can either have positive or negative equity. The
difference between your car’s value and the loan you owe to
the car loan lender should give you an idea of whether you
have positive or negative equity in your car.
In essence, you will need just two items to calculate your
car's equity:
- The current balance of your car loan
- The actual resale value of your car
If the car you own is worth more than the outstanding
balance you still owe on loan, it has positive equity. If
you owe more on your car loan than your financed car is
worth, it has negative equity.
Determining The Current Balance Of Your Car Loan
You can find out how much you still have to pay on the car
loan by loan balance calculators available online. If you
get a monthly statement from your car loan provider or if
you have access to your loan information online, then you
can quickly obtain your car loan balance from the latest
monthly statement or online loan information. The
information on the most recent statement or online account
provided by the loan provider should tell you how much you
still owe on your car loan.
In case you do not get monthly statements from your loan
provider, you will need to contact your car loan lenders
such as a bank, car dealership, or online lender to get a
current payoff amount on your auto or car loan.
Find Your Car's Actual Value
Once you know your loan’s current balance, you need to
determine the vehicle’s actual value. You may need to do
some math here since the automotive market fluctuates
greatly depending on the season, the year, and even the day.
There are some other factors to understand as well when it
comes to determining actual values on cars.
Here are the significant factors that affect your car’s
value:
- Condition of your car
- Mileage
- Car Color
- Car’s brand and model
- Modifications
- Service history
The above factors can reduce or, in some cases, improve your
car's worth. This means even if your vehicle is in a similar
condition to when you bought it, the price you paid may not
be the actual value of the car's current market value.
There Are Two Ways To Determine The Actual Value Of A Car:
Get An Appraisal At A Car Dealership
A reputable used car dealership can give you an accurate
appraisal of your car. Even a used car auction house should
be able to provide you with an appraisal of your car.
However, the easiest and most accurate way to get an
appraisal of your vehicle is to get it at a car dealership
because they usually give more precise analysis than a
computer or a used car auction house.
If you go to a car dealership, they will inspect the
condition of your car and compare it with other vehicles on
the market with similar makes, models, and conditions to
determine the most accurate value of your vehicle and its
demand. The whole process will take about half an hour and
should be free. A car dealer, typically a manager at a car
dealership, should be able to tell you the trade-in-value
and the market value of your car.
Use An Online Appraisal Tool
You can use an online appraisal tool that will estimate the
market value of your car. There are a lot of websites with
online appraisal tools to help you determine the value of
your car. The
Kelley Blue Book
(KBB) is one of the most trusted resources online, which
will estimate the market value of your vehicle based on the
make, model, and condition of it. An online appraisal tool
such as the Kelley Blue Book is easy to use to find the
value of a car.
When using an online appraisal tool, make sure to enter your
vehicle's information as accurately as possible whether you
would like to get a trade-in value or a private-sale value.
The demand and market value of your vehicle can change based
on the place where you are selling the vehicle, mainly
depending on the climate and terrain of the area.
Other reputable sites that you can use to get an online
appraisal of your car include
Edmunds,
CARFAX
,
NADAguides, and more. The value that any of these online appraisal
tools give you is a number that you will use to calculate
what is equity in a car.
How to Use Your Car's Equity?
If you have taken out a loan on your car from a bank, a car
dealership, or an online lender, then you may want to
calculate your car's equity to see if you could gain some
benefit out of it. The positive equity in your car can help
you refinance your auto loan to save on interest or reduce
your monthly payment.
On the other hand, if you’re struggling to get a
personal loan
because your credit score is bad, you may choose to use the
value of your car to borrow money from a traditional lender
or a reputable online lender. That is where an auto equity
loan comes in. You can qualify for an auto or title equity
loan using your car's equity.
Most community banks, some small banks, and some credit
unions offer auto equity loans. The rates for auto equity
loans depend on your credit score if you hurt your credit
score and the value of your car. However, usually, these
traditional lenders require that consumers have a good
credit score and
credit history
to qualify for an auto equity loan. On the other hand, some
reputable online lenders offer cash for liens on car titles
to people with low credit scores and credit history.
Car equity or
registration loan
providers typically do their evaluation and appraisal of
your car, but it works similarly. You could get a loan using
the equity in your car and your ability to pay a loan. The
good news is that although you'll be getting a car
collateral loan, you do not have to leave it behind.
Is a Title Equity Loan Right for Me?
When you have a financed car and you’re hit by a financial
emergency, the positive equity in your vehicle can be turned
into cash today. Getting a loan using this positive equity
can help you keep your vehicle and continue using it while
you repay your loan.
CASH 1 is ready to help you get cash fast today! If you have
positive equity available on your car, you can put it to
work for you by taking out an auto equity loan. A title
equity loan with a lien allows you to get same day cash, and
you can use it for paying bills,
medical expenses
and other expenses you may have to pay urgently.
The ease and speed with which you can secure a loan using
equity in your car makes it right for not just you but even
those with poor credit. However, before you apply, it is
crucial to assess how much you want to borrow and the
maximum loan payments that fit your budget.