Auto equity loans are excellent ways to use your vehicle to put more money back into your budget. Auto equity loans are similar to other types of equity loans in that a bank or lending institution evaluates the worth of your vehicle and gives you a certain percentage of what the vehicle is worth.
If your credit score is 680 or higher then your interest rate may be lower. Those with credit scores of 630 or lower may find auto equity loans to be cost prohibitive in the long run.
One thing to consider when researching auto equity loans is that since it is a loan you must pay the loaned amount back each month. Having an equity loan on your car hurts your credit if you miss payments, and in extreme situations where multiple payments are missed, your car is repossessed.
Another drawback is that auto equity loans are only issued to borrowers if the car has been completely paid off. If you are still making payments on a vehicle and do not have any equity built up in the car, then most lending institutions refuse to issue loans.
The interest rate you receive for an auto equity loan is largely dependent on your credit history, credit score and the condition of your vehicle.
Most of the larger banks, such as Chase, Wells Fargo, Bank of America and Citibank do not even offer auto equity loans. To find an auto equity loan inquire with community credit unions, or high interest lenders such as SpringLeaf Financial or Mariner Finance.
Keep in mind that most of these lenders can go as high as 36% interest.