If you own a vehicle, you can use it as collateral for a car title loan. Lenders such as Embassy Loans of Florida will lend money based upon the value of a car. Most title loan companies prefer that a car or truck is paid in full; however, there are occasions when a lender will process a title loan even though money is owed on it.
To obtain a car title loan, it is helpful to know the value of your vehicle first. If there is an existing lien on the vehicle, the value of the car must be greater than the lien amount. If you have a vehicle on which you owe $8,000, but the car is only worth $7,000, taking out a car title loan will not work. Even if the lien amount was only $2,000, title loan companies are still wary of issuing a loan because of ownership issues.
Before going to apply for a car title loan, you should get an idea of what your car is worth. There are a number of resources available to do so. One of the easiest is to use the Kelley Blue Book website, www.kbb.com. Once on the website, you will be asked for details about your vehicle. You will put in the year, make, model, and other features. You must also give an accurate evaluation of the condition of the vehicle: excellent, good, fair, or poor.
With the information you have submitted, Kelley Blue Book will return an estimate of the value of the vehicle’s retail value. It will also give values for the private sale of the vehicle or if you would trade the vehicle into a dealer. Lenders will use these numbers when calculating how much they will actually lend.
Car title loan companies will not allow you to borrow up to the full amount of the vehicle. In most cases, a lender will loan 30 to 50 percent of the total value. If a vehicle is worth $10,000, most lenders will only allow a maximum loan amount of $5,000. This helps to protect the lender should a borrower default on the loan.
When a borrower fails to repay the loan, the lender can take possession of the vehicle. When a vehicle is repossessed, lenders attempt to sell the vehicle in an effort to recover their losses. If a lender loans $5,000 on a $10,000 car and the borrower defaults, the lender can recover all of its losses by selling the car for more than $5,000.