When you build up value in an item, such as a car or a home, that value is called equity. Through lenders, you can use that equity to get a loan. Many people are familiar with home equity loans; however, you can also get an equity loan for your vehicle.

Your Credit Score Doesn't Matter

When you get an auto equity loan, your credit score doesn't matter. It is one of the few loans you can get when you have a poor credit score. In most instances, the lender will not even look up your credit score. Instead, they are more concerned about the amount of collateral that you can provide for the loan and if you have a job that will allow you to pay back the loan. Many car equity loan companies will not even run your credit score.

The Value of Your Car Matters

The most important thing when it comes to a car equity loan is the value of your vehicle. The loan that you take out will be based on the value of your vehicle and how much equity you have in the vehicle. The loan will not exceed the equity that you have in your vehicle, so that is why the value of your vehicle is so important when you are trying to get a car equity loan.

Loan Terms Vary

The loan terms that you are offered can vary greatly. The repayment time period may be very compacted, such as a few months, or it may be closer to a year. Car equity loans don't tend to get stretched out over years, because the value of your vehicle is backing up the loan, and your vehicle isn't going to hold the same value a year from now as it does right now. 

The interest rates can vary greatly as well, so you need to look closely at the interest rates and the loan terms. Generally, the higher the interest rate or the longer the loan terms, the more you will end up paying for the loan.

Don't Have to Own Your Vehicle

Finally, with a car equity loan, you don't have to own your vehicle. Some lenders will work with you if you have a loan on the car, but the loan is less than a certain percentage of the car's value. However, some car equity loan lenders will require you to fully own the car before they will do business with you.

With a car equity loan, you don't have to own your vehicle. You are cashing in on the equity of the vehicle. What matters is the value of your car and what you have paid for the car. The loan terms vary, so be sure to shop around.

For more information, contact a business that provides auto loan lending services.