Cash Car Equity Loans – How to Make an Informed Decision
Are you in urgent need of funds but are incapable to rely on conventional loans from banks and credit cards because of a low credit score? If you’ve ever been in a cash crunch and have ended up taking a car equity loan from predatory lenders, you know how devastating it can be to your financial state.
Some lenders prey on borrowers with bad credit and need quick cash. They may charge very high interest rates and trap you in a cycle of debt that is hard to break out of. They could impose rigid terms that make it unlikely to repay the debt, so hey can ultimately repossess and sell your vehicle at a profit. In addition, they could also add clauses that prevent you from taking legal act against them protecting your assets.
Your car is your lifeline and a significant asset to put up as collateral. Losing your car due to failure to make the required payments according to the agreement can result in car repossession. This will earnestly influence your family and your capability to go to work.
To make an informed decision when taking out a car equity loan, it’s significant to understand how the loan is structured and what you will be expected to pay and when you need to pay it by. The most significant parts of the agreement to observe out for are the interest rates and the length of the term.
The interest rate is the amount a lender is charging you for lending you cash. It is voiced as a percentage of the borrowed amount. Some lenders only let you know their interest rate in monthly terms, but you must calculate the annual interest rate by multiplying by the lenders rate by 12, especially if you plan to take a long-term loan.
Another factor that you should keep in mind is the term of the agreement, or how long you have to pay back the total cash owed. This can vary from 30 days to more than 24 months depending on the agreement. Find out if you will be charged pre-payment penalties in the event that you determine to pay back the loan early.
What Happens To the Loan Agreement when the Term Completes?
Read the fine print to learn what happens to your loan agreement once it has reached the end of the term. Make sure you repay a part of the principal with every installment or else you could end up owing the lender a “balloon payment”, which can equal the total borrowed amount, at the end of the term.
If the bulk of your monthly payments go towards paying back only the interest, and you find that you’re incapable to pay the balloon payment, the loan may have to be flipped over into a fresh agreement, perhaps with a higher rate of interest. This can get you deeper in debt and make it more difficult to increase your low credit score.
Read all the loan agreement terms, ensure you work with a reputed lender who offers competitive interest rates, pliable payment terms and no pre-payment penalties, and understand your consumer rights to make an informed decision when taking a car equity loan.