Can I Use My Vehicle as Collateral If I Still Owe on It?

If you’re in a financial bind and need cash fast, using your car as collateral to take out a title loan may be a viable option. But what if you still owe money on your auto loan? Can you still use your vehicle as collateral? Let’s shed some light on this question and explore the specifics of car title loans.

The Basics of Using Your Car as Collateral

A car title loan allows you to borrow money by using the value of your vehicle as collateral. The car’s title transfers to the lender until you repay the loan. It’s a quick and easy way to access funds, especially if you have a low credit score or urgently need cash to pay an unexpected expense.

But what if you’re still paying off your car? That’s where things get interesting.

Taking Out a Title Loan When You Still Owe on Your Car

Ideally, your vehicle should be completely paid off if you hope to use it as collateral. A clear title with no existing lien is often a prerequisite for loan approval. However, some lenders will consider your application even if you have outstanding payments on your car. The loan amount in such cases usually depends on the equity you’ve built up—that is, the difference between the car’s market value and the remaining balance on your auto loan.

Although a unique option, this approach can be risky. Should you default on the title loan, you could potentially lose your vehicle and still be responsible for paying the remaining auto loan balance.

Is a Car Title Loan Right for You?

While car title loans can be lifesavers when you’re in dire straits, they’re not without their drawbacks. The most glaring of these is the high interest rate many lenders charge, making some title loans significantly more expensive than traditional loan options. Plus, if you’re unable to repay the loan in the agreed time, you risk having your vehicle repossessed, a devastating blow for most people.

Before deciding to take out a title loan, weigh your options carefully. Look for a lender that offers low interest rates and flexible terms, and assess your ability to repay the loan before signing on the dotted line.

VIP Title Loans: A Better Loan Option

Not all car title loan providers are created equal. That’s where VIP Title Loans steps in. We provide a flexible, customer-centric approach, offering some of the lowest title loan interest rates in Texas. This makes all the difference when seeking a manageable loan you can repay quickly. And unlike some lenders, we don’t automatically disqualify you if you still owe on your car. With enough equity in your vehicle, we may still be able to help.

If you have further questions or are ready to proceed with a car title loan, please call us at 817-265-2274, fill out our online application form, or visit one of our five convenient locations in the DFW Metroplex. We’re ready to help you get the fast cash you need.