In general, equity is the ownership of an asset that has some debt attached to it. A car equity loan is quite similar to a home equity loan. In both cases you are using some asset, a home or car, to secure finances. Car equity loans can be a great solution for people who won’t be qualified for standard bank loans for reasons such as having bad credit.
When you apply for an auto title loan, the lender evaluates the value of your car and according to this and to parameters such as your ability to repay the loan, determines how much you can borrow. Your car is used as equity for the loan and therefore becomes the legal possession of the lender. However, you remain the registered owner so you get to keep driving it!
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