What specific property will suffice as equity for a car loan?
I want to take out a car loan. Is it possible to use the car that I am buying as collateral? Or does it have to be property not related to the loan?
Collateral in car loans might seem tricky, but it’s fairly straightforward! In most cases, the car you buy will automatically serve as collateral, and you won’t need to put up any more equity.
When you buy a car with a car loan, it comes with a lien—or a lender’s legal right to the property. That’s what allows your lender to take the car if you don’t make your payments. For most lenders, the lien is enough assurance you’ll pay your debt.
However, some lenders may require additional collateral, aside from your car. Here are some of the most commonly accepted forms of collateral property:
- Cash accounts
- Future paychecks
- Valuable jewels/jewelry
- Machinery or equipment
- Equity in your property
It can be nerve-wracking to put up your belongings against a loan, but it should be fine so long as you stay on top of your payments. If you’re worried about keeping up with your monthly rate, you can save on car ownership by finding the lowest car insurance rates with Jerry.
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