Car loan – Precautions to take with loans backed by car
If you find yourself in default , the need to get money and the absence of credit may be the reasons why you decide to pawn your car. Therefore, many companies offer loans backed by your car, even with the possibility of continuing to use the vehicle.
There are several ways to make these loans by car, and the two most common are:
- Deliver the amount of money guaranteed by our vehicle.
- Make a car purchase contract with option to buy back.
However, and if you already have defaults, certain precautions must be taken before signing an agreement with these companies:
Read the contract
In both modalities, it is recommended to read the contract completely and know the commitment that will be assumed, because on many occasions, after signing the agreement it is not possible for the client to return the borrowed money and he loses the car by a value less than the real one.
The first step that companies tend to take is to assess the car, based especially on the valuation tables disclosed by various motor vehicle sales associations. However, that value is also calculated as a percentage of the acquisition price that is shrinking as the age of the car increases.
In both cases, car prices are set down. The appraisal usually reflects between 60% and 80% of the real value of the car. But, for car loan companies any vehicle is not conducive to the business, since it has to be in good condition, they must have all the relevant documentation and taxes paid and cars that are more than ten years old are not usually accepted.
You could be selling the car
If the client accepts the amount of money offered, the car loan company will present you with a large number of papers to sign and try to persuade you of the benefits of this operation, but you have to be very careful because you could be selling your car without being aware of it or accepting conditions almost impossible to cover in order to recover the car.
Companies have an advantage
During the agreed term, there are car loan companies that keep the car in their facilities. There are also others that offer the client to continue using it but you have to pay a rent amount. Care must be taken with this pact, because that indemnified money for renting your own vehicle is not deducted from the amount owed.
In addition, the company sometimes keeps a set of car keys and the documentation of the vehicle, so when placing the vehicle as collateral for the loan, if the loan expires, the payment of the loan has not been made borrowed amount, the company withdraws the car to deal with the debt.
In Good Credit we offer a totally different way, even if you have unpaid cars, you continue driving your car and you pay a fee in which you repay the loan from the first day, so in the end you have nothing pending.