Car equity loans are subprime lending instruments offered to borrowers with bad or no credit. They make use ofa pink slip as collateral. Therefore, they are typically approved within minutes and processed in a few hours provided all the necessary documentation is available.
Auto Insurance for Pink Slip Loans
When you take out car collateral loan which is also known as a pink slip loan, most lenders will hold on to the pink slip or car equity while allowing you to drive the vehicle. But, in order to protect their collateral, almost all car title loan company will require you to provide proof of auto insurance.
When a lender approves a car title loan for a borrower with bad or no credit, unlike a pawnbroker, they only hold on to the vehicle title. If the vehicle is involved in an accident, it could devalue and damage the vehicle or expose the borrower to legal action, especially if there is no auto insurance on the vehicle.
To prevent this from happening, most lenders will not grant an un-insured driver an equity loan. If you can get the basic minimum coverage that is required by law, it will satisfy the needs of many auto loan lenders and help you get fast approval for your loan. Auto insurance is required by law in most states, although the specifics vary from state to state. For example, the state of South Carolina in the USA mandates a bodily injury liability of at least $25,000 per person.
Depending on the state and the vehicle that is insured, your monthly payments on auto insurance will vary greatly. But, you can get a discount on it. To find the best rates, you must compare quotes online. There are many reasons why companies will offer promotional rates. For example, if you have a car model that is high on safety features, install anti-theft devices, or if you take a safe driving course, all these factors will help you get cheap insurance. Other factors that can lower your costs are driving accident or ticket-free for 3 years.
If you have another vehicle insured with the same company, you can get a reduction in price. Getting insurance through a group plan, such as your alumni association or employers can also get you cheaper rates. Some vehicle owners have taken pink slip loans to pay their car insurance fees. This is not a good idea because it’s not what equity loans are for. Pink slip loans should only be used when you can’t get cash from traditional lenders and you’ve no other option. They are typically for emergency expenses and carry higher interest than traditional lending instruments.
If you make use of them carelessly and do not repay the loan as at when due, you could get caught in a debt cycle with fees penalties, rollovers, balloon payments and higher interest rates that could force you to end up paying multiple times more than the amount you borrowed.