Salvage Car Title Loans If you’re coming up short with the money you need to pay your bills or cover an emergency expense, one convenient option you may have heard of is a title loan. But what is a title loan? And is it only an option for cars with clean titles, or can you […]
Salvage Car Title Loans
If you’re coming up short with the money you need to pay your bills or cover an emergency expense, one convenient option you may have heard of is a title loan. But what is a title loan? And is it only an option for cars with clean titles, or can you also get a salvage car title loan?
Knowing the way a title loan works will help you figure out if it’s the right choice for your specific situation. Here’s what you need to know about the title loan process and if you can get one when your car has a salvage title.
The Basics on Title Loans
There are two categories of loans – unsecured, which have no collateral and instead are only backed by the borrower’s personal guarantee, and secured, which have a piece of the borrower’s property attached as the collateral for the lender to repossess in the event of a default.
Title loans are secured by your car, although you don’t need to let the lender keep your car while you’re in the process of paying back what you owe. Title loan lenders only have your car title during that time, and they give that back once you’re done paying the loan off.
The federal government set an age minimum of 18 for anyone who wants to borrow a title loan, which means lenders need to check your birthdate on your ID before you can apply for the loan. Other than that, title loan laws are set at the state level, which means your state determines the following:
- The maximum interest rate a lender can charge
- The minimum and maximum title loan term length
- The minimum and maximum title loan amount
- What happens if you default and the lender needs to repossess your car
Many states don’t set many limits regarding title loans. For example, just because states can set maximum title loan amounts or interest rates doesn’t mean they all do that, and in fact, many of them don’t. You’ll need to check your specific state’s laws to find out for sure, or apply through our online application. One of our helpful representatives will follow up with you and answer any questions you have.
How a Salvage Car Title Loan Works
Your car’s value is the most important factor when you get a title loan. It determines if you get approved for the loan and the amount you’re approved for, although how much you can borrow will also depend on your state’s title loan limit, should it have one.
The way a lender figures out your car’s value is simple, and it goes as follows:
- The lender will use a vehicle value guide to look up your car by plugging in the year, make, model, style and approximate mileage.
- The lender will check out your car and figure out if it’s in poor, fair, good or great condition.
- The lender will use the information in the guide and its inspection to set a current market value for your car.
Now, the lender won’t loan you the full amount your car is worth. That would put them at risk of losing money if you defaulted, which is why lenders usually issue title loans for anywhere from 30 to 50 percent of what the car is valued at.
Here’s where a salvage title comes into play. When a car has a salvage title, that means it was at one point declared a total loss by the insurance company, and then it was repaired. It could be in great shape, but the fact that it was totaled means there could still be underlying damage. It’s more of a wildcard, and for that reason, cars with salvage titles are valued lower than cars with normal titles.
You can still get a salvage car title loan, just keep in mind that the lender will see the salvage title and lower the amount they’re willing to lend you because of it. So, if you looked up your car in a vehicle value guide and were expecting to get a title loan for a certain amount, it may be much less than your expectation.
How much less is a car with a salvage title worth? That varies depending on who is valuing the car, but it’s common for a salvage title to cut a car’s value in half. That means if your car would have a current market value of $10,000 with a clean title, its value may be $5,000 with a clean title, and the lender would likely loan you $1,500 to $2,500 instead of $3,000 to $5,000.
Don’t Let a Salvage Title Stop You from Getting a Title Loan
Even though you won’t be able to borrow as much because of your car’s salvage title, you can probably still get the money you need. Fill out our online application and we can provide a title loan estimate. We’ll also connect you with a lender in your area.