Many auto finance experts would say that an auto pawn loan is not often made for someone who wants low interest rates. Instead, most of these car title loan or auto pawn loan offers have short repayment terms and very high interest rates in contrast to other types of lending. However, the only real limitations to loan agreements involve what a lender and borrower can agree on, and some drivers may be able to get a secured auto loan using their title as collateral, without signing on for sky-high interest rates. Here are some of the ways to get the best car loan rates on an auto pawn loan or similar car loan options.
In almost any kind of loan process, great credit is the major key to getting low interest rates. That’s because a lot of the lender’s strategy in offering interest rates is tied to the borrower’s risk assessment. If you can prove that you represent a lower risk with a higher credit rating, lenders are likely to recognize this and offer a lower interest rate. Another way to get lower interest rates is offering a larger down payment. These are not things that auto pawn loan lenders are generally expecting, but they are critical if you want to take advantage of low interest rates on loans.
What many of these lenders would like to do is take the title to your existing vehicle, sign you on for 50% of your vehicle’s value and attach subpar interest rates as part of a ‘quick and easy’ auto loan agreement. If customers pay off their loan within the repayment term provided, the lender will have to return the title and terminate the loan, albeit grudgingly. What often happens, though, is that the typical auto pawn loan borrower has problems assembling the cash they borrowed within the time frame of the loan. This is where auto pawn lenders excel at raising interest rates through something called a “rollover.” Lenders repackage a loan with a higher interest rate and keep on waiting. This process often repeats itself until the borrower is hopelessly trapped in high debt.
What you need to do to find an auto pawn loan with lower interest rates is take the credit information you’ve acquired, along with your title, and go to various shops, negotiating a different kind of auto pawn loan that truly gives you breathing room, along with competitive interest rates. You may encounter several declines from lenders who are used to offering higher rates, but you may find that some lenders will offer you secured loans with rates that look good to you.
You may be able to find an unconventional loan package, where collateral is only an accessory to a primarily unsecured loan based on a great credit rating, proof of income and other intangible assets that the borrower can provide. Using these guidelines, you may be able to come up with a good agreement with a local lender, where your auto title is only part of what you offer to lower the risk assessment.
Looking at the interest rates on an auto pawn loan or similar loan agreements is a great way to negotiate a package that you will be happy with in the long term.